The  CHEMICAL 
FOUNDATION 

INCORPORATED 


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AIMS   AND   PURPOSES   OF 


THE  CHEMICAL  FOUNDATION 


INCORPORATED 

AND   THE    REASONS    FOR 
ITS   ORGANIZATION 


AS   TOLD   BY 


A.  MITCHELLlPALMER 

UNITED  STATES  ATTORNEY  GENERAL' AND  FORMER 
ALIEN  PROPERTY  CUSTODIAN 


IN   HIS  REPORT  TO  CONGRESS 


FRANCIS  P.  GARVAN 

ALIEN  PROPERTY  CUSTODIAN 

IN  AN  ADDRESS  TO  THE  NATIONAL  COTTON 
MANUFACTURERS'  ASSOCIATION 


•  ■•  •    U  »  1 


NEW  YORK 

1919 


'9 


^ 


HOW  GERMANY  DOMINATED  THE  AMERICAN 
CHEMICAL  AND  DYESTUFF  INDUSTRY 

\_From  the  Alien  Property  Custodian's  Report] 

THE  great  field  of  chemical  industry  presented,  at  the  outset, 
perhaps  the  most  difficult  of  the  many  problems  which  the 
Alien  Property  Custodian  was  expected  to  solve.   It  was,  or 
had  been  until  importations  ceased,  saturated  through  and  through 

I  with  German  influence.     In  regard  to  no  branch  of  human  en- 
deavor  was  the  myth  of  German  invincibility  more  firmly  fixed  in 

^the  public  mind.  The  country  was  flooded  with  German  chemists; 
and  those  who  were  not  German  by  origin,  were  mostly  German, 
directly  or  indirectly,  by  training.  A  vast  proportion  of  the  per- 
sons engaged  in  the  business  bore  German  names.  Connections 
more  or  less  close  between  American  and  German  houses  were  fre- 
quent and  obvious.  There  was  unquestionably  a  considerable 
German  interest  in  such  manufacturing  as  was  being  carried  on. 
In  view  of  the  well-known  and  uniform  policy  of  the  great  German 
government-aided  combinations  to  embark  in  foreign  manufacture 
only  when  export  from  Germany  was  not  feasible,  this  interest 
seemed  unlikely  to  be  large;  but,  unless  it  could  be  discovered  and 
rooted  out,  no  substantial  Americanization  of  the  industry  was 

/  possible.  The  German  chemical  industry,  which  had  so  thoroughly 
penetrated  and  permeated  our  own,  was  gigantic,  perhaps  the 
strongest,  and  certainly  the  most  remunerative  of  all  Teutonic 
industries.  The  task  of  identifying  and  taking  over  its  property 
in  the  United  States  was  thus  a  direct  attack  upon  a  most  formid- 
able opponent;  while  the  information  on  which  the  work  had  to 
be  based,  had  to  be  derived,  to  an  exceptional  extent,  from  men 
hostile  by  birth  or  tradition. 

In  order  to  give  a  fair  understanding  of  the  situation,  it  is  neces- 
sary to  sketch  briefly  the  history  of  the  German  chemical  industry. 
From  about  the  middle  of  the  nineteenth  century,  the  practical 
application  of  chemical  science  began  to  occupy  the  attention  of  a 

M10823 


ri^e   CHEMICAL    FOUNDATION,    Inc. 

constantly  increasing  number  of  the  best  scientific  and  industrial 
minds  of  Germany.    A  combination  of  natural  advantages  and 
national  characteristics  led  to  rapid  advance.    The  industrial  dis- 
trict in  which  the  necessary  materials  and  other  facilities  were 
found  or  developed  was  exceptionally  compact.    Distances  were 
short  and  transportation  easy.  Labor  was  cheap,  docile,  and  stable. 
On  the  other  hand,  the  national  habit  of  mind  was  peculiarly  fitted 
bw)^  for  chemical  research  work,  and  particularly  for  the  interminable 
'^^to^  ^    tasks  presented  by  such  research,  in  the  way  of  exhausting  the  im- 
mensely numerous  possible  combinations  available  within  a  par- 
ticular field.    From  the  first,  scientific  attainment,  and  particularly 
accomplishment  in  the  field  of  research,  appealed  strongly  to  the 
c^  public  mind.    Men  of  science,  and  particularly  research  workers, 

'-^cu  ^      were  more  highly  regarded  than  in  other  countries.    This  tendency 
^^        was  strongly  fostered  by  the  Government,  which,  by  conferring 
honors  and  titles,  did  everything  possible  to  exalt  the  position  of 
the  successful  scientist. 

As  a  consequence  of  these  conditions,  the  universities  were  at  an 

\i  early  date  provided  with  the  most  elaborate  and  advanced  equip- 
ment for  research  work,  and  attracted  to  themselves  an  extraordi- 
nary proportion  of  the  ablest  young  men  of  the  nation.  They 
accordingly  proceeded  to  turn  out  a  constantly  increasing  number 
of  highly  trained  technical  men,  whose  services  were  available  to 
the  rising  chemical  industry.  The  number  of  these  men  was  such 
that  the  inevitable  competition  between  them  for  places  made  the 
average  salaries  exceedingly  small.  Highly  skilled  service  was, 
therefore,  available  to  the  German  chemical  manufacturer  at  an 
extraordinarily  low  cost.  In  this  respect  he  had  a  marked  advan- 
tage over  the  manufacturers  of  any  and  every  other  country  in  the 
world. 

These  advantages  were  made  use  of  to  an  extent  nowhere  else 
approached,  because  from  a  comparatively  early  date  the  impor- 
tance of  research  work  to  practical  industry  was  firmly  grasped  by 

X/  both  the  industrial  and  governmental  ruling  classes.  The  alliance 
of  the  manufacturer  and  the  university  professor  became  con- 

\j  stantly  closer  and  more  complete.  To  meet  the  needs  pointed  out 
by  the  industrial  leaders,  armies  of  plodding,  but  nevertheless 

[4] 


The  CHEMICAL   FOUNDATION,    Inc. 

skillful,  chemists  completed  hundreds  of  thousands  of  separate 
researches.  The  results  of  these  kept  the  German  chemical  manu- 
facturers constantly  in  the  van — always  somewhat  ahead  of  their 
competitors  in  other  countries  in  the  way  of  new  processes  and 
products. 

While  all  that  has  been  said  above  applies  in  a  measure  to  every 
form  of  chemical  activity,  the  German  advantages  were  naturally 
less  in  the  manufacture  of  the  heavy  chemicals  than  in  the  more 
difficult  and  complicated  processes  involved  in  other  forms  of  the 
industry.  Chemicals  which  are  consumed  in  great  quantities,  like 
sulphuric  acid  or  soda  ash,  are  produced  at  prices  so  low  that  costs 
of  transportation  are  often  a  controlling  factor.  Accordingly,  in 
this  branch  of  the  trade  the  Germans  never  attained  supremacy. 
The  natural  tendency  was  for  each  country  to  supply  itself  with 
these  essential  materials,  and  this  natural  tendency  had  not,  at 
least  so  far  as  the  United  States  was  concerned,  been  overcome. 

In  two  other  great  branches  of  chemical  industry,  however,  the 
Germans  had  attained  not  only  the  first  place,  but  to  all  intents 
and  purposes  a  world  monopoly — that  is  to  say,  in  the  practical 
application  of  organic  chemistry  to  the  manufacture  of  dyestuffs 
and  medicinals.  Although  the  first  coal-tar  dye  was  made  in  Eng- 
land by  an  English  chemist  and  the  next  important  step  in  the 
development  of  the  industry — the  production  of  Fuchsine,  or 
Magenta — was  the  work  of  a  Frenchman,  the  Germans  almost 
immediately  advanced  beyond  the  rest  of  the  world  in  the  develop- 
ment of  this  infinitely  complex  industry. 

This  complexity  of  the  manufacture  of  dyestuffs  as  a  business 
proposition  is  almost  beyond  belief.  Tens  of  thousands  of  distinct 
dyes  were  produced  in  the  German  factories,  and  over  900  of  these 
were  actually  sold  in  appreciable  quantities,  in  the  American  mar- 
ket alone,  before  the  war.  Each  of  these  nine  hundred  and  odd 
products  required  a  separate  and  distinct  process  of  manufacture, 
one  differing  from  the  next,  in  many  cases,  as  widely  as  if  the 
products  had  been  those  of  unrelated  industries.  While  all  these 
dyestuffs  and  a  host  of  pharmaceuticals  have  a  common  source,  in 
that  they  are  derived  originally  from  coal  tar,  they  descend  from 
this  common  ancestor  by  an  enormous  number  of  separate  family 

Us: 


The   CHEMICAL    FOUNDATION,    Inc. 

lines.  From  the  hundreds  of  distinct  substances  found  in  coal  tar 
lo  so-called  crudes  form  the  starting  points  of  substantially  all  the 
processes  which  result  in  dyes.  From  these  more  than  300  so-called 
intermediates  are  produced  by  a  variety  of  more  or  less  complex 
chemical  reactions.  Most  of  these  reactions  require  the  use  of  large 
quantities  of  acids  and  other  chemicals  not  produced  from  coal  tar. 
From  the  intermediates  thus  obtained  an  infinite  number  of  pos- 
sible dyestuffs  can  be  produced.  Many  thousand  such  dyestuffs 
have  been  actually  produced  and  marketed. 

In  carrying  out  the  processes  which  result  in  the  extraction  of 
the  crudes  from  coal  tar,  the  conversion  of  crudes  into  interme- 
diates, and  of  intermediates  into  dyes,  the  quantities  of  each  sub- 
stance produced  depend  not  upon  the  will  of  the  manufacturer,  but 
upon  the  inexorable  laws  of  chemistry.  The  proportion  of  the 
various  substances  obtained  can  be  varied  slightly  by  skillful 
manipulation,  but  only  to  a  small  extent.  The  manufacturer  can 
not  avoid  producing  large  quantities  of  certain  materials  in  order 
to  secure  perhaps  smaller  quantities  of  others.  Again,  at  the  very 
starting  point  of  the  industry,  in  extracting  the  crudes  from  the 
original  coal  tar,  an  analogous  situation  arises.    The  tar's  content 

\(  of  anthracene,  from  which  the  most  valuable  of  all  modern  dyes 
are  derived,  is  relatively  small;  that  of  naphthalene,  for  instance, 
is  immensely  larger.  The  tar  distiller  can  not  obtain  anthracene 
without  producing  or  wasting  much  greater  quantities  of  naphtha- 
lene, benzol,  and  other  crudes.  The  same  truth  holds  good  in  every 
subsequent  step  of  the  immensely  complex  processes  of  dye  manu- 
facture. At  each  step  by-products  are  produced  in  addition  to  the 
products  sought.  The  obvious  result  is  that,  unless  the  final  prod- 
uct can  be  sold  at  a  colossal  price,  uses  or  markets  must  be  found 
for  most  of  these  innumerable  by-products.    Many  of  them,  fortu- 

V^'nately,  are  useful  in  the  manufacture  of  intermediates  and  dyes. 
Many  have  been  found  to  have  important  medicinal  efi^ects  and 
have  taken  permanent  rank  as  pharmaceuticals.  For  others  no 
use  has  been  found,  and  the  unavoidable  production  of  these  repre- 
sents pure  waste. 

The  most  important  feature,  however,  of  this  production  of  by- 
products is  the  relation  which  it  bears  to  the  explosive  industry. 

1^1 


The   CHEMICAL    FOUNDATION,    Inc. 

All  the  most  important  explosives  of  the  present  day  are  either 
\  coal-tar  products  or  the  result  of  chemical  processes  requiring  the 
use  of  coal-tar  products.     In  a  large  dyestuff  factory  there  is  an 
unavoidable  production  of  considerable  quantities  of  substances 
which  are  directly  available  for  conversion  into  explosives.    More- 
.^  over,  in  addition  to  these  by-products  which  can  be  used  for  manu- 
facture of  explosives,  many  of  the  materials  which  are  not  by- 
products but  are  directly  useful  for  the  production  of  dyes,  can 
also,  by  slight  alterations  in  the  processes  employed,  be  converted 
into  explosives.    For  example,  in  the  production  of  sulphur  black, 
one  of  the  most  important  black  dyes,  a  slight  variation  in  the 
final  step  of  the  long  and  complicated  process  of  manufacture  will 
transform  the  ultimate  product  into  picric  acid.    A  still  more  strik- 
""  ing  example  is  that  of  paramononitrotoluol.    This  is  an  interme- 
diate necessarily  made  in  quantities  often  beyond  the  needs  of  the 
dye  makers.    To  the  end  of  the  last  century  many  thousand  tons 
of  this  substance  had  accumulated  in  the  German  dye  works, 
which  were  making  frantic  efforts  to  find  uses  for  it  in  dye  making. 
s.      About  1 904  these  efforts  suddenly  ceased.  Trinitrotoluol  (T.N.T.) 
'^      had  been  adopted  as  a  military  explosive,  and  every  pound  of  the 
accumulation  was  directly  available  for  easy  conversion  into  this 
most  formidable  of  high  explosives.    More  important  still,  how- 
ever, than  this  unavoidable  production  of  materials  for  explosive 
rnanufacture,  is  the  fact  that  the  technical  skill  req»gaed  for  the 
manufacture  of  explosives  is  precisely  that  possessed  by  the  chemi- 
cal staff  of  a  successful  dye  works  and  is  to  be  found  nowhere  else. 
Three  things  are  apparent  in  regard  to  a  business  conducted 
under  such  conditions.    One  is  that,  unless  limited  to  the  manu- 
facture of  a  very  few  carefully  selected  products,  it  must  be  carried 
\,    out  on  a  large  scale  with  the  aid  of  immense  resources  in  the  way 
of  capital  and  technique.    Another  is  that,  if  carried  out  on  a  large 
scale,  one  of  its  most  important  features  will  inevitably  be  the 
maintenance  of  large  research  laboratories  to  work  out  the  infinite 
problems  raised  by  the  necessity  of  disposing  of  by-products.    A 
third  is  that  the  connection  with  the  explosive  industry  is  so  close 
_i  that  no  Government  which  gave  any  serious  consideration  to  the 
'    possibilities  of  war  could  fail  to  see  the  necessity  of  aiding  and 

111 


The  CHEMICAL   FOUNDATION,    Inc. 

controlling  the  industry.  The  truth  of  each  of  these  propositions 
was  at  once  demonstrated  in  the  history  of  the  German  dyestuff 
industry.  From  an  early  period,  the  manufacture  became  concen- 
trated in  a  few  important  companies. 
These  companies,  ultimately  six  in  number,  developed  into  enor- 
V  mous  establishments  producing  practically  complete  lines  of  dyes 
and  manufacturing  most  of  their  own  crudes  and  intermediates,  as 
well  as  many  of  their  acids  and  heavy  chemicals.  Several  of  these 
establishments  also  became  large  producers  of  pharmaceuticals  in 
order  to  procure  an  outlet  for  their  by-products.  Outside  of  these 
very  large  houses,  the  industry  was  confined  for  the  most  part  to 
small  establishments  producing  only  a  limited  number  of  carefully 
selected  dyes,  so  chosen  as  to  minimize  the  by-product  difficulty, 

Nj  and  so  organized  as  to  enable  the  owners  to  save  most  of  the  over- 
head expense  by  themselves  furnishing  the  required  technical  skill 
and  superintendence.  These,  indeed,  were  mostly  little  more  than 
assembling  plants.  In  the  great  establishments,  the  research  labo- 
ratories became  large  and  highly  efficient  institutions.  In  these 
laboratories  hundreds  of  chemists  were  constantly  employed. 
Their  facilities  were  placed  at  the  disposal  of  research  chemists 
from  universities — often  men  who  had  no  connection  with  the  dye 
industry  whatever.  Many  of  the  manufacturers'  own  chemists 
were  allowed  and  encouraged  to  proceed  with  researches  which  had 
no  probable  immediate  commercial  utility,  but  which  tended  to 
increase  the  existing  supply  of  knowledge  in  those  general  regions 
of  the  world  of  organic  chemistry  in  which  the  dyestufi"  concerns 
were  operating.  The  result  of  all  this  inevitably  was  the  accumu- 
lation of  an  immense  mass  of  scientific  data  which  usually  afforded 

\  a  quick  and  easy  solution  to  each  industrial  problem  as  it  arose. 
The  results  were  sometimes  startling.  The  most  striking  instance, 
perhaps,  is  the  case  of  the  Pfleger  patent.  The  invention  covered 
by  this  patent  solved,  by  the  use  of  sodium  amide,  of  which  an 
overproduction  was  available,  the  problem  of  producing  indigo 
direct  from  aniline,  and  thus  afforded  a  process  far  simpler  than 
and  at  least  as  cheap  as  any  theretofore  known.  As  an  instance  of 
how  closely  such  matters  are  followed  by  the  German  public,  it 
may  be  noted  that  the  announcement  of  the  purchase  of  this  patent 

[83 


^ 


\/ 


The  CHEMICAL    FOUNDATION,    Inc. 

\  by  the  great  Hoechst  works,  one  of  the  largest  Germ-an  dye  manu- 
facturers, advanced  the  company's  stock  1 50  points  on  the  stock 
exchange  in  a  single  day.  The  importance  of  this  research  branch 
of  the  industry  is  thus  hard  to  overestimate.  Finally,  the  connec- 
tion with  the  explosives  industry  resulted,  as  is  well  known,  in  con- 
stant governmental  assistance  to  and  control  of  the  dye  industry. 
Much  was  done  by  the  German  Government  to  insure  the  pros- 
\  perity  of  the  dye  industry  and  its  immediate  convertibility  to  the 
\  production  of  munitions. 

These  conditions  soon  produced  in  the  dye  industry  certain  re- 
sults similar  to  those  which  occurred  in  all  the  other  important 
German  industries  during  the  great  period  of  expansion  at  the  end 
of  the  nineteenth  century.  The  improvements  in  processes  brought 
about  by  research  laid  heavy  emphasis  on  the  value  of  quantity 
production.  Quantity  production,  carried  on  by  competing  houses, 
led  to  overproduction.  Overproduction  led  to  a  determined  effort 
to  establish  and  maintain  a  large  export  trade.  The  natural  ad- 
vantages of  the  German  industry,  as  compared  to  the  industry  in 
other  countries,  prevented  serious  competition  in  Germany  itself. 
The  Government's  tariff  and  other  policies  enabled  home  prices  to 
be  kept  up.  It  was  then  evidently  to  the  advantage  of  any  manu- 
facturer to  produce  far  more  than  he  could  sell  in  the  home  market, 
even  if  his  export  trade  had  to  be  carried  on  at  a  loss,  when  by 
doing  so  he  could  use  a  process  so  economical  that  his  profits  on 
home  trade  would  be  largely  increased.  Accordingly,  German  dye- 
stuffs  began  to  appear  in  every  country  at  prices  which  domestic 
manufacturers  could  not  meet.  The  inevitable  result  was  that  in 
country  after  country  the  domestic  manufacture  was  destroyed  or 
stifled  in  its  cradle.  As  soon  as  this  had  been  accomplished,  it  was 
no  longer  necessary  for  the  German  exporters  to  sell  at  or  below 
cost.  Prices  were  immediately  raised  and  handsome  profits  real- 
ized. The  tendency  to  this  result  was  recognized  by  the  German 
Government  from  the  first,  and  every  facility  was  afforded  to  the 
growing  export  trade.  It  was  fully  realized  by  both  the  civil  and 
military  authorities  that  if  a  world  monopoly  in  the  dyestuff  in- 
\^  dustry  could  be  built  up  the  military  strength  of  Germany  would 
be  colossally  enhanced,  since  it  alone  of  all  the  great  powers  would 

191 


\ 


The  CHEMICAL    FOUNDATION,    Inc. 

then  be  in  a  position  to  secure  immediate  supplies  of  the  vast 
quantities  of  munitions  likely  to  be  needed  in  a  modern  war.  )[ 

The  methods  under  which  this  dumping  policy  was  conducted, 
and  its  extent,  may  be  illustrated  by  a  few  specific  instances.  Most 
of  these  occurred  in  branches  of  the  chemical  industry  other  than 
the  manufacture  of  dyes,  for  the  simple  and  sufficient  reason  that 
in  this  country,  at  least,  the  dyestuff  industry  never  reached  a  point 
where  it  required  much  discouragement.  When,  however,  in  1910 
the  first  determined  effort  was  made  in  this  country  to  establish  the 
manufacture  of  an  important  intermediate,  when,  that  is  to  say, 
the  Benzol  Products  Co.  was  organized  by  a  group  of  men  inter- 
ested in  the  heavy  chemical  industry,  to  manufacture  aniline  oil  on 
a  large  scale,  the  German  hand  was  immediately  shown.  The  price 
of  aniline  oil  at  the  time  of  the  establishment  of  this  company 
averaged  1 1 3/2  cents.  As  soon  as  its  manufacture  was  fairly  under 
way,  the  German  exporters  commenced  to  cut  the  price.  Appar- 
ently, no  definite  prices  were  made  by  the  Germans,  but  they 
adopted  the  simple  policy  of  offering  any  customer  of  the  new 
concern  supplies  at  less  than  the  price  he  was  paying.  For  exam- 
ple, one  of  their  most  important  customers  refused  an  advanta- 
geous contract  at  8>^  cents,  stating  that  he  had  assurance  from  the 
Germans  that  whatever  price  the  Benzol  Products  Co.  made  would 
be  met  and  bettered  by  them.  Accordingly,  the  new  company 
struggled  on,  conducting  its  operations  without  profit,  and  only 
because  it  was  supported  by  a  group  of  men  of  exceptional  deter- 
mination and  insight  was  it  able  to  survive  until  the  war  gave  it 
an  opportunity  to  establish  its  business  on  a  firm  foundation. 
Among  other  examples  are  the  following:  In  1903,  there  were  in 
the  United  States  five  manufacturers  of  salicylic  acid.  By  191 3, 
three  of  these  had  failed.  Of  the  two  survivors,  one  was  the  Hey- 
den  Chemical  Co.,  a  mere  branch  of  a  German  house,  which,  as 
such,  I  have  since  taken  over.  During  the  latter  part  of  the  decade 
referred  to,  salicylic  acid  was  selling  in  Germany  at  from  26]/^  to 
30>4  cents.  During  the  same  period,  the  German  houses  were  sell- 
ing it  in  this  country,  after  paying  a  duty  of  5  cents,  at  25  cents,  or 
from  6  to  ID  cents  below  what  they  were  getting  at  home. 


The  CHEMICAL    FOUNDATION,    Inc. 

A  similar  situation  developed  in  the  manufacture  of  oxalic  acid. 
In  1 90 1,  when  there  was  no  American  manufacture,  it  was  sold  by 
the  Germans  at  6  cents.  In  1903,  when  the  works  of  the  American 
Acid  &  Alkali  Co.  were  started,  the  price  was  immediately  dropped 
to  4.7  cents,  at  about  which  figure  it  remained  until  1907  when  the 
American  factory  was  shut  down  for  a  number  of  months.  During 
this  shutdown  period  the  price  was  instantly  raised  to  9  cents. 
When  the  factory  reopened  the  price  was  again  dropped  until 
1908,  when  the  company  failed.  It  was  then  reorganized  and  in 
1909  secured  the  imposition  of  a  2-cent  duty  on  the  acid,  from 
which  time  up  to  the  beginning  of  the  war  the  price  ran  at  about 
7>^  cents  a  pound.  The  same  process  was  carried  on  in  regard  to 
bicarbonate  of  potash.  In  1900  there  was  no  American  manufac- 
ture and  imports  ran  about  160,000  pounds.  In  1901  American 
manufacture  began.  This  succeeded  so  well  that  in  1906  imports 
had  dropped  to  45,000  pounds.  At  this  time  the  American  manu- 
facturer's price  was  6^  cents,  while  the  import  value  was  given  at 
4.9  cents.  In  the  following  year  the  Germans  made  a  determined 
and  successful  onslaught.  Their  import  value  was  lowered  to  2.2 
cents  with  a  result  that,  instead  of  45,000  pounds,  310,000  pounds 
were  imported.  Accordingly,  in  1908,  the  American  manufacturer 
failed.  The  price  was  immediately  raised  to  7>4  cents  and  re- 
mained thereabouts  thereafter  until  the  war.  Many  similar  in- 
stances might  be  cited,  but  these  sufficiently  indicate  the  method 
and  its  results. 

This  determined  onslaught  upon  the  competing  industries  of 
other  countries,  this  definite  attempt  to  secure  world  monopoly 
naturally  created  a  strong  tendency  toward  combination.  As  has 
been  stated,  by  the  end  of  the  nineteenth  century  the  real  manu- 
facture of  dyes  on  a  large  scale  was  concentrated  almost  exclusively 
in  six  great  firms.    These  were  the  following : 

Badische  Anilin  und  Soda  Fabrik,  Ludwigshafen  on  the  Rhine, 

\/  hereinafter  known  as   Badische;   Farbenfabriken   vorm.   Friedr. 

Bayer  &  Co.  in  Leverkusen,  hereinafter  referred  to  as  Bayer; 

Actien-Gesellschaft  fur  Anilin-Fabrikation  in  Berlin,  hereinafter 

referred  to  as  Berlin;  Farbwerke  vorm.  Meister  Lucius  &  Briining 


The   CHEMICAL    FOUNDATION,    Inc. 

in  Hoechst  am  Main,  hereinafter  referred  to  as  Hoechst;  Leopold 
Cassella  G.m.b.H.  in  Frankfort,  and  Kalle  &  Co.  Aktien-Gesell- 
schaft  in  Biebrich, 

Each  of  these  six  great  companies  had  attained  enormous  pro- 
portions long  before  the  war.  Only  two  other  concerns  have  car- 
ried on  manufacture  on  a  scale  in  any  sense  comparable.  These 
are  the  following:  Chemische  Fabrik  Griesheim  Elektron  of  Frank- 
fort A.  M.,  a  company  which  has  absorbed  a  number  of  smaller 

N^  manufacturers,  and  Chemische  Fabriken  vormals  Weiler-ter-Meer, 
Uerdingen. 

It  will  be  noted  that  all  of  these  establishments  with  the  single 
exception  of  Berlin  are  concentrated  in  a  narrow  strip  of  territory 
near  the  Rhine  and  its  tributaries.  Their  growth  may  be  illustrated 

\f  by  a  few  figures  as  to  two  of  the  largest.  Hoechst  was  organized  in 
1863  and  started  with  five  workmen.  By  1880  it  employed  1,860 
workmen  and  57  chemists,  using  1,840  horsepower.  It  then  pro- 
duced 1,750  diflferent  colors.  In  191 2  it  employed  7,680  workmen, 
374  foremen,  307  chemists,  and  74  engineers  and  used  30,000  horse- 
power. The  number  of  colors  reached  1 1 ,000.  The  works  of  the 
Badische,  which  was  organized  in  1865,  covered,  in  19 14,  500  acres, 
with  a  water  front  of  a  mile  and  a  half  on  the  Rhine.  There  were 
100  acres  of  buildings,  42  miles  of  railway  within  the  works,  and 
the  power  plants  comprised  368  steam  engines  and  472  motors; 
1 1,000  workmen  were  employed  and  the  company  was  capitalized 
at  54,000,000  marks.  The  establishment  of  Bayer  was  on  a  scale 
entirely  comparable  with  these  two  giants  of  the  industry.  The 
works  of  Cassella  and  Berlin  were  slightly  smaller,  while  those  of 
Kalle  were  the  least  important  of  the  six.  Weiler-ter-Meer  was 
important  largely  because  of  its  connection  with  the  great  Swiss 
house  of  Geigy  &  Co.  Griesheim  Elektron,  prior  to  the  war,  had 
enormous  works  chiefly  devoted  to  the  manufacture  of  electrolytic 
chemicals  and  became  an  important  factor  in  the  dyestuff  business 
only  within  recent  years,  when  by  absorption  of  the  Oehler  Works 
and  the  Chemikalien  Werke  Griesheim  its  color  production  reached 
a  scale  approaching  that  of  the  larger  houses.  Of  these  eight  great 
concerns  each  had  active  agent  houses  in  the  United  States,  which 
were  among  the  most  important  factors  in  the  American  industry 


The  CHEMICAL   FOUNDATION,    Inc. 

and  accordingly  in  the  work  of  the  Alien  Property  Custodian  in 
connection  therewith. 

The  tendency  toward  combination,  however,  by  no  means  ex- 
hausted itself  in  the  creation  of  these  giant  enterprises.  The  same 
causes  which  produced  the  enormous  concentrations  of  capital  in 
other  German  industries  in  the  form  of  cartels  were  also  working 
in  the  chemical  industry.  By  1904  two  such  immense  combinations 
had  been  formed  in  the  dyestuff  industry,  each  including  three  of 
the  largest  six  houses.  One  of  these  comprised  Bayer,  Badische, 
and  Berlin;  the  other  Hoechst,  Cassella,  and  Kalle.  Indirectly, 
through  their  financial  transactions  with  the  great  banks,  and  also 
directly,  each  of  these  cartels  was  aided  and  guided  by  the  Imperial 
Government.  By  pooling  profits,  by  so  arranging  capitalization 
that  each  company  held  stock  in  the  other  companies  of  its  own 
cartel,  and  by  other  familiar  means,  the  risks  incident  to  the  enor- 
mous expansion  of  the  business  and  the  immense  increases  of 
export  trade  were  minimized.  The  centripetal  tendency,  however, 
did  not  stop  here.  In  1916  the  two  preexisting  cartels  were  com- 
bined with  Griesheim  Elektron,  Weiler-ter-Meer,  and  various 
smaller  companies  in  one  gigantic  cartel,  representing  a  national-  v 
ization  of  the  entire  German  dye  and  pharmaceutical  industry. 
The  combination  is  extremely  close.  Profits  of  the  companies  are 
pooled  and  after  being  ascertained  each  year  on  common  principles 
are  divided  according  to  agreed  percentages.  Each  factory  main- 
tains an  independent  administration,  but  they  keep  each  other 
informed  as  to  processes  and  experiences.  To  stimulate  and  keep 
up  a  spirit  of  competition  between  the  factories  it  has  been  ar- 
ranged that  each  product  shall  be  manufactured  by  two  or  more 
factories.  There  is  also  an  agreement  that  in  order  to  circumvent 
tarifi"  obstacles  in  other  countries  materials  are  to  be  produced  out- 
side of  Germany  by  common  action  and  at  common  expense  when- 
ever and  wherever  desirable. 

At  the  time  of  the  formation  of  this  enormous  organization  the 
capitalization  of  each  of  the  principal  component  companies  was 
largely  increased.  -Hoechst,  Badische,  and  Bayer  each  increased 
their  capitalization  by  36,000,000  marks,  bringing  the  capital  of 
each  up  to  90,000,000  marks.    The  new  stock  was  ofl'ered  to  the 

n'3n 


The  CHEMICAL    FOUNDATION,    Inc. 

old  stockholders  at  107,  which  was  a  melon  of  some  magnitude, 
since  the  last  available  quotations  for  the  stock  of  one  at  least  of 
these  companies  at  the  end  of  19 16  was  490.  Berlin  increased  its 
capital  from  19,800,000  to  33,000,000  marks.  Other  increases 
brought  the  total  nominal  capital  of  the  group  to  over  383,000,000 
marks.  For  many  years  a  large  part  of  the  enormous  profits  of 
these  concerns  has  been  put  back  into  the  works  with  the  result 
indicated  by  the  stock  quotations.  The  real  capitalization  is  thus 
much  greater  than  this  nominal  figure.  In  fact,  it  is  estimated  that 
the  actual  investment  in  the  works  comprising  the  cartel  is  not  less 
than  $400,000,000.  It  can  not  be  doubted  that  this  enormous 
engine  of  commercial  warfare  has  been  created  expressly  for  the 
expected  war  after  the  war,  and  that  it  is  intended  to  undertake 
still  more  efficiently  and  on  a  larger  scale  the  various  methods  by 
which  German  attacks  upon  all  competition  were  carried  on. 

In  addition  to  the  favorable  effects  of  the  foregoing  factors,  an 
important  aid  to  the  success  of  German  export  trade  in  dyes  and 
pharmaceuticals  was  the  advantage  taken  of  the  patent  laws  of  the 
several  countries.  Owing  to  the  immensely  greater  number  of 
research  chemists  engaged  in  this  work  in  Germany  than  in  other 
countries,  far  more  patentable  inventions  in  organic  chemistry 
were  made  by  the  Germans  than  by  the  chemists  of  any  other  na- 
tion. In  the  United  States  alone  they  took  out  patents  by  the 
thousand.  For  example,  Bayer  alone  accumulated  in  the  neighs 
borhood  of  1,200  such  patents  which  were  placed  in  the  hands  of 
one  of  its  subsidiary  companies.  The  Badische  had  approximately 
500  such  patents,  while  each  of  the  other  members  of  the  cartel 
held  patents  by  the  score.  As  there  was  substantially  no  effort 
(with  small  exceptions)  by  any  of  the  German  concerns  to  manu- 
facture in  the  United  States,  these  patents  were  obviously  obtained 
and  held  in  order  to  prevent  the  formation  of  an  American  dye 
industry  and  to  make  impossible  importation  from  other  countries. 
The  latter  of  these  two  purposes  seems  to  have  been  the  more 
important  in  the  German  mind.  They  seem  to  have  had  no  fear 
that  any  American  industry  could  be  established  on  a  competing 
basis.  They  had,  however,  some  respect  for  the  Swiss,  French,  and 
English  industries,  though  at  the  time  of  the  commencement  of  the 


The   CHEMICAL    FOUNDATION,    Inc. 

\,  European  war  Germany  was  supplying  approximately  nine-tenths 
of  the  world's  needs  in  dyes.    With  the  aid  of  the  patents,  espe- 
cially the  product  patents,  they  could  and  did  exclude  all  importa- 
tions of  competing  dyes  in  the  most  important  classes. 
As  if  the  legitimate  advantages  of  the  German  industry,  supple- 

r  mented  by  the  ruthless  if  legal  tactics  of  dumping  and  destructive 

I  underselling,  were  not  enough,  the  methods  of  the  great  German 
houses  in  carrying  on  their  business  in  this  country  were  from  the 
first  honeycombed  with  corruption.  Bribery  of -dyers  was  carried 
on  almost  universally  and  on  a  large  scale.  The  head  dyers  of  the 
various  mills  and  other  chief  customers  of  the  dye  manufacturers 
were  subsidized  in  many  direct  and  indirect  ways.  These  dyers 
frequently  controlled  the  situation,  since  if  any  one  of  them  wished 
to  have  his  superiors  cease  using  the  dye  of  one  manufacturer  and 
buy  instead  the  dye  made  by  some  other  company,  nothing  was 
easier  than  to  control  the  complicated  process  of  dyeing  in  such  a 
way  that  the  dyes  furnished  by  the  house  which  was  the  least  lib- 
eral to  the  dyer  would  produce  wretched  results.  It  would  then  be 
an  easy  matter  for  the  dyer  to  get  the  manager  of  his  mill  to  try 
the  dyes  offered  by  the  more  liberal  briber,  and  with  the  exercise  of 
a  little  care,  the  new  dye  would  be  sure  to  produce  satisfactory 
results.  So  extensive  was  this  corruption  that  I  came  across  only 
one  American  consumer  that  had  escaped  its  ill  effects.     This 

^concern,  the  United  Piece  Dye-Works  of  Lodi,  N.  J.,  avoided 
the  difficulty  by  having  all  its  dyes  purchased  by  the  head  of 
the  company  himself,  under  contracts  providing  that  no  barrel 
or  package  should  show  the  name  of  the  manufacturer.  The  com- 
pany was  thus  able  to  designate  the  dyes  which  its  dyers  were  to 
use  solely  by  its  own  arbitrary  numbers,  and  the  dyers  were  thus 
unable  to  determine  whose  dyes  they  were  using  and  to  whom  they 
should  look  for  their  graft.    Against  these  illegitimate  methods 

^  practiced  by  concerns  having  such  resources  and  compelled  by 
such  an  imperious  necessity  to  seek  and  maintain  supremacy  in 
foreign  fields,  honest  domestic  competition  found  the  utmost  diffi- 
culty in  maintaining  itself,  and  it  is  therefore  not  strange  that  until 
the  outbreak  of  the  war  the  American  industry  was  of  little  im- 
portance. 

i:-5] 


The   CHEMICAL    FOUNDATION,    Inc. 

Besides  the  obstacles,  legitimate  and  illegitimate,  thus  placed  by 
the  Germans  in  the  way  of  the  establishment  of  an  American  in- 
dustry, it  would  appear  that  there  was  considerable  organized 
propaganda  intended  to  discourage  American  attempts.  It  seems 
to  have  been  regarded  as  the  duty  of  a  good  German  chemist  in  the 
United  States  to  preach  the  doctrine  of  the  invincibility  of  the 
German  chemical  industry,  the  impossible  difficulty  of  the  pro- 
cesses involved  in  the  manufacture  of  many  important  dyes,  and 
the  hopelessness  of  procuring  the  necessary  technically  trained  men 
and  skilled  labor  outside  of  Germany.  How  far  this  was  an  inten- 
tionally organized  movement  and  how  far  merely  a  sample  of  the 
prevalent  German  megalomania,  it  is  difficult  to  say,  but  the  re- 
sults were  analogous  to  those  of  the  well-known  potash  propa- 
ganda, by  which  it  would  seem  that  the  farmers,  and  to  some 
extent  even  the  scientific  men,  of  the  United  States  were  persuaded 
that  far  more  potash  was  required  for  our  soil  than  was  actually 
needed.  Whether  intentional  or  not,  this  propaganda  had  its 
effects.  At  all  events  prior  to  the  war  only  a  few  Americans  had 
the  temerity  to  believe  that  anything  could  be  done  in  this  country 
against  the  German  advantages  in  the  way  of  technical  skill,  cheap 
labor,  governmental  support,  and  unscrupulous  methods. 

Indeed,  up  to  August,  1914,  the  American  industry  in  dyestuflfs 
and  medicines  consisted  of  little  more  than  a  series  of  rather  small 
assembling  plants.  In  spite  of  the  fact  that  enormous  supplies  of 
coal  tar  were  available  and  that  several  of  the  crudes  could  be 
secured  in  this  country  under  most  advantageous  conditions, 
hardly  any  of  the  necessary  intermediates  were  made  here,  and  the 
manufacture  of  dyes  was  almost  entirely  confined  to  working  upon 
intermediates  imported  from  Germany. 

At  one  time  the  industry  seemed  to  have  taken  a  real  start.  Be- 
tween 1879  and  1883  nine  establishments  had  commenced  the 
manufacture  of  dyes  and  were  apparently  prospering.  In  1883, 
however,  there  was  a  sudden  reversal  of  conditions,  and  within  a 
year  five  of  the  nine  shut  down.  The  other  four  continued  on  a 
close  margin  and  were  still  in  existence  at  the  outbreak  of  the  war. 
Of  these  by  far  the  largest  was  the  Schoellkopf  Aniline  &  Chemical 
Works  of  Bufi^alo.    This  company,  organized  and  maintained  by 

D63 


The   CHEMICAL    FOUNDATION,    Inc. 

an  American  family  of  German  origin,  which  had  at  its  disposal 
very  large  resources  derived  from  other  business,  had  continuously 
made  a  strenuous  and  honest  effort  to  establish  a  real  dye  industry. 
From  time  to  time  they  commenced  the  manufacture  of  various 
intermediates,  including  at  one  period  aniline  oil,  which  was  manu- 
factured on  a  large  scale.  In  every  instance,  however,  the  manu- 
facture was  almost  immediately  brought  to  an  end  by  German 
price  cutting,  and  at  the  time  of  the  war  the  dyes  made  by  this 
establishment  were  the  product  of  intermediates  imported  from 
Germany.  The  company,  nevertheless,  had  established  a  consid- 
erable business  and  while  operating  on  a  very  small  ratio  of  profit 
supplied  the  greater  part  of  the  non-German  dyes  consumed  by  the 
trade.  Of  the  other  three  concerns  Heller  &  Merz  had  likewise 
established  a  fair  business  in  a  few  colors  also  made  from  German 
intermediates.  The  same  may  be  said  of  the  Central  Dye  Works 
and  the  Consolidated  Color  &  Chemical  Co.  which  were  operating 
on  a  still  smaller  scale.  The  latter  of  these  companies,  it  may  be 
noted,  was  owned  almost  exclusively  by  Mr.  Herman  A.  Metz,  the 
American  representative  of  Hoechst,  one  of  the  largest  German  dye 
works,  and  since  the  outbreak  of  the  war  Mr.  Metz  has  likewise 
become  the  controlling  factor  in  the  Central  Dye  Works.  In  addi- 
tion to  these  four,  a  fifth  plant  was  established  a  few  years  before 
the  outbreak  of  the  war,  at  Albany,  by  the  American  subsidiary 
of  the  great  German  house  of  Bayer. 

These  five  concerns  comprised  the  entire  American  industry,  and 
it  will  readily  be  seen  that  operating  as  they  did  on  German  inter- 
mediates they  existed  purely  on  sufferance  and  were  absolutely  at 
the  mercy  of  the  German  producers.  They  made  neither  alizarin 
nor  anthracene  colors  nor  synthetic  indigo,  which  being  the  fastest 
known  dyes  are  the  most  valuable  product  of  the  industry.  The 
exclusive  ability  to  provide  these  fast  colors,  most  of  which  were 
protected  by  patents,  would  have  placed  the  entire  trade  in  the 
hands  of  the  Germans  even  if  no  other  factors  favorable  to  them 
had  been  present.  These  dyes  were  indispensable  to  the  textile 
manufacturers,  and  by  refusing  to  supply  them  except  to  houses 
which  would  buy  their  other  supplies  from  the  German  manufac- 
turers— that  is,  by  the  familiar  process  of  "full-line  forcing" — the 


The   CHEMICAL    FOUNDATION,    Inc. 

latter  could  have  retained  complete  control  of  our  market,  even  if 
our  manufacturers  had  been  otherwise  fully  able  to  compete  in  the 
manufacture  of  the  simpler  colors.  The  30  per  cent  duty  payable 
on  almost  all  of  the  coal-tar  colors  apparently  afforded  no  real  pro- 
tection, nor,  as  will  be  shown,  was  it  possible  for  the  American 
industry  to  secure  any  relief  under  the  Sherman  Act. 

The  condition  of  the  other  branches  of  the  American  chemical 
industry  was,  as  has  been  stated,  not  quite  so  bad.  The  manu- 
facture of  acids  and  heavy  chemicals  was  well  established  on  a 
profitable  basis,  though  even  in  this  manufacture  the  employment 
of  numerous  German  chemists  and  processes  gave  a  certain  Teu- 
tonic color  to  the  industry.  In  the  manufacture  of  fertilizers  there 
was,  in  a  measure,  a  balance  of  power.  The  Germans  had  a  com- 
plete monopoly  of  potash  and  its  salts  owing  to  their  ownership  of 
the  only  considerable  known  easily  worked  potash  deposits.  This 
was  somewhat  offset  by  our  possession  of  phosphates  of  which  the 
Germans  had  no  considerable  supply.  There  was  a  certain  amount 
of  German  ownership  in  companies  operating  in  the  phosphate 
field,  most  of  which  ownership  has  been  unearthed  and  taken  over. 
In  nitrates,  of  course,  the  United  States,  like  the  rest  of  the  world, 
was  mostly  dependent  upon  the  Chilean  supply. 

In  the  manufacture  of  chemicals  in  which  electrical  processes, 
requiring  large  and  cheap  supplies  of  electric  power,  played  an 
important  part,  the  situation  was  such  that  the  Germans  had  been 
induced  to  enter  to  some  extent  into  the  manufacture  in  this  coun- 
try. They  had  organized  and  owned  the  Niagara  Alkali  Co.  which, 
utilizing  the  cheap  electric  power  of  Niagara,  became  the  largest 
domestic  manufacturer  of  caustic  potash,  the  latter  produced  from 
German  raw  materials.  This  company  also  supplied  the  chlorine 
gas  which  was  the  raw  material  used  by  the  only  considerable 
American  manufacturer  of  liquid  chlorine.  In  the  same  way  the 
great  Frankfurt  chemical  works  known  as  the  Deutsche  Gold  und 
Silber  Scheide  Anstalt,  had  through  its  American  subsidiaries,  the 
Roessler  &  Hasslacher  Chemical  Co.,  the  Niagara  Electric  Chemi- 
cal Co.,  and  the  Perth  Amboy  Chemical  Works,  established  the 
only  large  American  production  of  cyanides  and  the  largest  Ameri- 
can production  of  formaldehyde  and  wood  distillation  products. 


The  CHEMICAL    FOUNDATION,    Inc. 

The  importance  of  these  industries  will  be  recognized  when  it  is 
remembered  that  cyanides  are  indispensable  to  the  mining  and 
electrotyping  industries,  while  formaldehyde  is  the  basis  of  the 
only  new  and  important  chemical  industry  of  American  origin,  the 
manufacture  of  synthetic  resin  products  such  as  Bakelite,  Con- 
densite,  and  Redmanol. 

In  medicinals  very  little  real  American  manufacture  existed.  A 
few  of  the  coal-tar  pharmaceutical  products  were  produced  by  two 
American  houses  in  St.  Louis,  the  Mallinkrodt  Chemical  Works 
and  the  Monsanto  Chemical  Works.  By  far  the  most  important 
factor  in  this  field,  however,  was  the  New  York  house  of  Merck  & 
Co.,  which  was  a  branch  of  the  world-famous  firm  of  E.  Merck  of 
Darmstadt,  and  has  accordingly  as  such  been  taken  over.  The 
enormous  dispensing  and  distributing  business  of  such  firms  as 
Parke  Davis  &  Co.,  Lilly  &  Co.,  and  Powers-Weightman-Rosen- 
garten  Co.,  successful  and  efficient  as  it  was  beyond  comparison 
with  similar  businesses  in  any  other  country,  seems  to  have  in- 
volved very  little  real  manufacture,  and  the  materials  used  were 
largely  imported.  There  seems  to  have  been  but  little,  if  any, 
German  interest  in  this  branch  of  the  industry,  except  among  small 
brokers  and  dealers. 

From  all  the  foregoing  it  will  be  seen  that  the  all-important  por- 
tion of  the  chemical  industry,  the  branch  in  which  the  work  of  the 
Alien  Property  Custodian  would  necessarily  be  most  arduous  and 
in  which  its  results  might  be  most  beneficial,  was  the  dye  industry. 
The  vital  character  of  that  industry  was  due  not  to  its  financial  im- 
portance, since  the  consumption  of  dyes  in  the  United  States  at 
the  time  of  the  outbreak  of  the  war  did  not  exceed  $25,000,000  a 
year  in  cost  to  the  consuming  industries,  nor  to  the  fact  that  these 
dyes  were  absolute  essentials  to  industries  producing  perhaps 
$2,500,000,000  of  goods  annually,  but  most  of  all  to  the  fact  that 
the  technical  skill  and  equipment  provided  by  a  successful  dye 
industry  furnished  the  means,  and  almost  the  sole  means,  to  which 
every  nation  must  look  for  advances  in  the  application  of  chemical 
science  to  practical  undertakings.  No  other  industry  offers  a  live- 
lihood to  any  such  large  numbers  of  highly-trained  scientific  chem- 
ists nor  any  such  incentive  to  continuous  and  extended  research. 

L'9] 


The  CHEMICAL    FOUNDATION,    Inc. 

As  has  been  stated,  the  opening  of  the  year  19 14  found  nine- 
tenths  of  the  dyes  used  in  our  industries  supplied  by  German 
houses  and  the  great  bulk  of  these  by  the  largest  six  German 
houses.  At  this  time  each  of  these  six  giants  was  represented  in 
this  country  by  a  subsidiary  American  corporation.  The  agent  of 
Bayer  was  Bayer  &  Co.  (Inc.),  a  New  York  corporation,  while  in 
the  Synthetic  Patents  Co.  (Inc.),  another  subsidiary,  was  vested 
the  ownership  of  the  1,200  American  patents  taken  out  by  the 
parent  house.  This  New  York  company  also  owned  other  subsidi- 
aries, including  the  Hudson  River  Aniline  Works,  through  which 
it  had  established  its  Albany  factory.  Berlin  was  represented  by 
the  Berlin  Aniline  Works,  also  a  New  York  corporation.  Kalle  & 
Co.  were  operating  through  a  third  New  York  corporation,  also 
called  Kalle  &  Co.  In  these  three  cases  all  of  the  stock  of  the 
American  house  was  admittedly  owned  outright  by  the  parent 
organization.  All  three  were  accordingly  taken  over  at  the  outset. 
The  great  Badische  Co.  acted  through  the  Badische  Co.  of  New 
York,  the  stock  of  which  appeared  on  the  books  to  be  owned  by 
Messrs.  Adolph  Kuttroff,  Carl  Pickhardt  and  their  chief  employees. 
Leopold  Cassella  &  Co.  were  represented  by  the  Cassella  Co.,  also 
a  New  York  corporation,  the  stock  of  which  appeared  to  be  owned 
by  its  president,  Mr.  William  J.  Matheson,  and  its  vice-president, 
Mr.  Shaw.  Hoechst  operated  through  a  New  York  company 
known  as  Farbwerke  Hoechst,  of  which  the  stock  stood  in  the  name 
of  its  president,  Mr.  Herman  A.  Metz.  Of  these  gentlemen  Messrs. 
Kuttroff  and  Pickhardt  were  Germans  by  birth  and  Americans  by 
naturalization,  Messrs.  Matheson  and  Shaw  American  by  birth 
and  tradition  and  Mr.  Metz  American  by  birth.  An  extensive 
investigation  was  instituted  by  my  bureau  of  investigation  under 
the  direction  of  Mr.  Francis  P.  Garvan,  and  as  the  result  of  a  long- 
continued  and  strenuous  effort  it  was  at  last  shown  that  the  osten- 
sible ownership  of  the  stock  of  these  three  branches  was  not 
genuine  but  that  each  remained  in  fact  owned  by  its  German  pro- 
genitor. As  will  hereinafter  appear  in  the  detailed  accounts  of 
these  proceedings,  each  of  these  three  companies  has  also  been 
taken  over. 

The  outbreak  of  the  war  cut  off  the  importation  of  dyes  from 

1:20] 


The   CHEMICAL    FOUNDATION,    Inc. 

Germany.  There  immediately  sprang  up  a  number  of  American 
companies,  mostly  small,  organized  to  embark  in  the  manufactur- 
ing business.  By  strenuous  efforts  these  companies  contrived  to 
avert  the  threatened  dye  famine  which  the  curtailment  of  the  Ger- 
man supply  apparently  rendered  inevitable.  Commencing  with 
those  dyes  which  were  easiest  to  produce,  and  gradually  extending 
to  a  limited  number  of  the  more  essential  and  well  known  of  the 
non-patented  colors,  the  production  increased  until  at  the  time 
when  I  took  office  the  requirements  of  the  textile  trade  were  being 
met  and  a  considerable  export  business  had  sprung  up.  The  qual- 
ity of  dyes  produced  was,  except  in  the  matter  of  standardization, 
comparable  with  the  German  dyes  of  similar  character,  but  the 
fast  alizarin  and  anthracene  colors  were  not  being  produced,  nor 
was  synthetic  indigo,  the  consumption  of  which  is  larger  than  that 
of  any  other  dye.  The  largest  of  the  existing  producers,  that  is  to 
say,  Schoellkopf  Aniline  &  Chemical  Works,  W.  Beckers  Aniline 
Co.,  and  the  Standard  Aniline  Co.  of  Wappingers  Falls,  have  been 
combined  with  the  aniline  oil  works  of  the  Benzol  Products  Co. 
and  with  the  appropriate  portions  of  the  business  of  the  General 
Chemical  Co.,  the  Semet  Solvay  Co.,  and  the  Barrett  Co.  into  a 
single  large  corporation  known  as  the  National  Aniline  &  Chemical 
Co.  This  combination  has  since  produced  considerably  more  than 
half  of  the  dyes  consumed  in  America.  During  the  same  period 
the  Dupont  Co.  had  begun  to  construct  an  enormous  plant  at 
Deepwater,  Del.,  established  an  immense  laboratory  employing 
approximately  200  chemists,  and  had  bought  the  plant  of  the 
United  Piece  Dye  Works' in  which  the  latter  company  had  suc- 
ceeded in  producing  a  number  of  the  most  valuable  dyes  applicable 
to  silk.  Among  other  important  concerns  the  Dow  Chemical  Co., 
Messrs.  Ault  &  Wiborg,  the  Sherwin-Williams  Co.,  and  the  New- 
port Chemical  Works  were  preparing  for  the  production  of  colors 
on  a  large  scale,  while  many  other  companies  were  turning  out 
appreciable  quantities.  The  prices  of  course  rose  enormously  and 
the  results  for  a  time  were  correspondingly  profitable. 

In  the  meantime  the  German  agencies  had  been  making  every 
effort  to  retain  their  organization  and  their  customers.  They  had 
on  hand,  in  19 14,  a  considerable  stock  of  German  materials.    One 


The  CHEMICAL    FOUNDATION,    Inc. 

or  two  of  the  companies,  notably  Bayer  &  Co.  (Inc.),  sold  out  at 
once  at  a  colossal  profit.  The  others,  apparently  determined  to 
retain  their  customers  and  their  German  connection  at  whatever 
cost,  peddled  out  what  they  had  in  limited  quantities,  allowing 
each  customer  only  a  small  quantity  per  month.  These  concerns 
made  their  sales  at  slight  advances  in  price,  hoping  by  this  treat- 
ment to  retain  their  customers'  good  will  until  the  resumption  of 
imports  could  be  brought  about.  This  process  was  assisted  by  the 
two  voyages  of  the  submarine  Deutschland,  each  of  which  brought 
to  the  representatives  of  the  six  great  houses  a  supply  of  the  most 
essential  dyes.  Bayer  &  Co.  (Inc.),  increased  its  production  some- 
what, as  did  Mr.  Metz  (the  American  agent  of  Hoechst)  in  his 
Consolidated  Color  &  Chemical  plant,  while  the  Cassella  Co. 
organized  a  new  subsidiary  known  as  the  Century  Color  Co.  to 
commence  manufacture  under  the  familiar  C.  C.  C.  trade-mark 
under  which  it  had  sold  the  goods  of  its  parent  German  house. 

At  the  time  when  I  took  office,  therefore,  the  American  dye 
industry  was  active  and  profitable  and  in  almost  undisturbed  pos- 
session of  the  field;  but  it  required  only  the  slightest  investigation 
to  show  that  the  new-born  industry's  hold  on  life  was  of  the  most 
insecure  description.  The  supply  of  crudes  had  been  so  expanded 
by  the  needs  of  the  explosive  industry  and  the  consequent  increase 
in  the  number  of  by-product  coke  plants  and  recovery  installations 
in  gas  works  that  our  supply  of  raw  materials  was  unsurpassed. 
We  were,  however,  producing  only  a  few  of  the  essential  inter- 
mediates. We  had  a  plentiful  lack  of  even  such  technical  knowl- 
edge as  was  required  to  produce  dyes  in  the  laboratory,  to  say 
nothing  of  the  vastly  greater  amount  of  similar  knowledge  required 
to  translate  laboratory  into  commercial  production.  In  the  case  of 
all  the  faster  dyes  Germany's  patents  had  prevented  every  attempt 
at  American  production,  and  while  the  trading  with  the  enemy  act 
authorized  issuance  of  licenses  under  these  patents,  the  terms  were 
such  that  no  licensee  could  hope  to  continue  the  manufacture  in 
competition  with  the  Germans  after  the  war.  In  the  meantime  the 
representatives  of  the  great  German  houses  were  holding  their 
organizations  together  and  keeping  their  trade  as  best  they  could 
by  doling  out  their  remaining  stocks  and  by  selling  under  their 


The   CHEMICAL    FOUNDATION,    Inc. 

own  names  American  products,  sometimes  mixed  with  their  own 
German  goods.  These  representatives  were  waiting  for  the  end  of 
hostilities  and  were  ready  at  a  moment's  notice  to  reembark  in  the 
importing  business  and  assist  their  German  parent  houses  to  de- 
stroy the  new  American  industry.  It  was,  therefore,  one  of  the 
most  vital  tasks  before  me  to  ascertain  every  trace  of  German  own- 
ership in  the  new  industry  and  particularly  in  the  American  repre- 
sentatives of  the  German  trust.  Unless  the  Germans  could  be 
deprived  of  the  benefit  of  these  branch  houses,  their  reentrance 
into  the  field  would  be  all  too  easy. 

This  proved  to  be  a  hard  task.  Every  variety  of  camouflage  had 
been  resorted  to  by  the  Germans  to  conceal  their  interests.  A 
favorite  method  in  this,  as  in  other  industries,  was  of  course  that 
of  a  fictitious  transfer  of  stock.  In  a  few  cases  such  transfers  were 
carried  out  after  the  severance  of  relations  and  before  the  declara- 
tion of  war.  In  these  cases  the  character  of  the  transaction  was 
fairly  obvious  and  our  course  correspondingly  simple.  In  other 
cases,  however — and  this  was  true  of  two  of  the  three  representa- 
tives of  the  great  German  houses  which  were  ostensibly  American 
owned — the  apparent  transfer  took  place  at  a  period  before  the 
war  was  thought  of,  at  least  by  anyone  outside  of  Germany.  In 
these  cases  the  transfer  was  the  result  of  an  attack  made  by  persons 
ostensibly  interested  in  the  textile  business  upon  the  representa- 
tives of  the  German  houses  under  the  Sherman  law. 

Up  to  about  1 9 10  all  the  great  German  houses  shipped  their 
goods  to  their  American  representatives  on  a  pure  consignment 
basis.  The  compensation  of  the  American  representative  was 
wholly  by  way  of  commission.  The  American  company  in  these 
cases  was  a  mere  selling  agency  or  branch.  In  19 12  a  group  of 
Philadelphia  lawyers  brought  about  the  prosecution  of  an  officer 
of  Bayer  &  Co.  (Inc.)  (or  its  predecessor,  Farben  Fabriken  of 
Elberfeld,  another  New  York  corporation)  for  some  of  the  corrupt 
practices  in  the  way  of  bribing  buyers,  which,  as  has  been  stated, 
had  become  universal  among  the  German  houses.  In  the  course 
of  this  prosecution  the  lawyers  in  question  became  familiar  with 
the  general  history  of  the  German  industry  and  at  once  realized 
that  it  might  be  made  the  subject  of  an  attack  under  the  Sherman 

1:233 


The   CHEMICAL    FOUNDATION,    Inc. 

law,  on  the  theory  that  each  of  the  German  companies  was, 
through  its  agent,  actually  doing  business  in  this  country  and  that 
the  two  great  cartels  were  conspiracies  in  restraint  of  trade.  Acting 
on  this  theory,  suits  were  commenced  for  triple  damages  against 
most  of  the  American  representatives.  The  institution  of  these 
suits,  which  were  subsequently  settled,  resulted,  in  at  least  two 
cases,  in  a  transfer  by  the  Germans  of  their  stock  in  the  American 
company  to  the  officers  of  that  company.  In  the  case  of  Badische 
Co.,  the  stock  of  which  was  already  in  the  names  of  the  American 
representatives,  it  was  only  necessary  to  change  the  basis  of  the 
business  from  consignment  to  sale.  This  was  done  in  all  the  cases, 
so  that  the  German  house  might  appear  not  to  be  doing  business 
in  this  country  through  its  representative,  but  to  be  merely  selling 
to  an  apparently  independent  American  corporation.  There  was 
on  the  surface  no  apparent  reason  why  these  transfers  should  not 
have  been  genuine.  Each  German  house  really  controlled  the  situ- 
ation with  reference  to  its  agent  because  it  could  instantly  ruin  its 
agent's  business  by  withdrawing  supplies.  Accordingly,  for  a  con- 
siderable period  these  houses  escaped  more  than  mere  general  sus- 
picion, and  it  was  not  until  the  Bureau  of  Investigation  of  my 
department  had  acquired  considerable  familiarity  with  German 
methods  of  camouflage  that  the  true  situation  could  be  disclosed. 

This  investigation,  of  course,  ran  parallel  with  the  similar  inves- 
tigations of  several  other  departments  of  the  Government  and  the 
Bureau  of  Investigation  received  valuable  aid  from  the  offices  of 
Military  Intelligence,  Naval  Intelligence,  and  War  Trade  Intelli- 
gence, as  well  as  from  the  Department  of  Justice  and  from  the 
British,  French,  and  other  allied  authorities.  All  these  bodies 
worked  in  close  cooperation  and  their  mutual  assistance  was  of 
inestimable  value.  Information  derived  from  these  sources  demon- 
strated that  the  chemical  industry  was  a  natural  center  for  espion- 
age and  that  this  had  been  true  long  before  we  entered  the  war — 
indeed,  before  the  war  began.  The  relation  between  the  German 
Government  and  the  great  German  chemical  houses  was  so  close 
that  representatives  of  the  industry  were  naturally  almost  direct 
representatives  of  the  Government,  and  their  work  in  this  country 
gave  them  unequaled  opportunities  for  examining  our  industries 


The  CHEMICAL    FOUNDATION,    Inc. 

from  within.  Customers  of  the  German  import  houses  were  con- 
stantly in  need  of  expert  advice  in  regard  to  the  processes  in  which 
their  goods  were  used.  The  advising  expert  supplied  by  the  Ger- 
man houses  naturally  saw  everything  there  was  to  see,  and  what 
he  learned  was  seldom  concealed  from  his  Government. 

After  the  war  began  the  industry  became  a  center  not  only  of 
espionage,  but  of  propaganda  and  of  direct  governmental  activity. 
The  number  of  striking  instances  of  this  development  is  so  great 
that  only  a  few  can  be  detailed,  but  these  appear  sufficiently  strik- 
ing. Among  the  early  examples  unearthed  by  the  Bureau  of  Inves- 
tigation was  that  of  the  by-product  coke  plant  established  by  the 
Lehigh  Coke  Co.  The  latter  was  a  corporation  organized  by  a 
syndicate  represented  by  the  Deutsche  Bank.  At  the  time  the  war 
broke  out  it  had  been  in  operation  for  a  number  of  years  and  was 
promising  considerable  success.  It  had  not,  however,  gone  exten- 
sively into  the  manufacture  of  coal  tar  and  its  derivatives.  In 
191 5,  however,  it  established  a  considerable  plant  for  these  pur- 
poses. Every  ounce  of  toluol  and  benzol  which  was  produced  was 
sold  under  contracts  binding  the  purchaser  not  to  use  or  permit 
the  use  of  the  product  for  the  manufacture  of  explosives  or  for  the 
benefit  of  the  allies.  An  examination  of  the  correspondence  be- 
tween Hugo  Schmidt,  the  agent  of  the  Deutsche  Bank  in  this  coun- 
try, and  the  bank,  shows  that  the  entire  undertaking  represented 
by  this  by-product  plant  was  a  direct  effort  by  the  German  Gov- 
ernment to  prevent  the  making  of  these  valuable  materials  for 
explosive  manufacture  in  the  United  States,  or  rather,  to  prevent 
their  use  for  the  benefit  of  Germany's  enemies.  The  undertaking 
was  decided  on  because  the  Deutsche  Bank  had  ascertained  that 
the  Bethlehem  Steel  Co.,  which  had  a  contract  with  the  Lehigh 
Coke  Co.  for  the  latter's  coke  and  gas,  had  practically  determined 
to  build  such  a  plant  for  its  own  purposes,  but  that  this  decision 
might  be  changed  if  forestalled  by  the  erection  of  a  plant  by  the 
Lehigh  Coke  Co.  This  actually  occurred,  with  the  result  that 
large  supplies  of  these  invaluable  coal-tar  products  were  kept  out 
of  the  munition  industry,  while  the  demand  for  them  from  other 
industries  was  prevented  from  having  its  natural  effect  in  bringing 
into  existence  American  plants  which  would  have  been  free  to 


The  CHEMICAL    FOUNDATION,    Inc. 

supply  the  allies.  This  condition  continued  until  just  before  we 
entered  the  war,  when  the  Deutsche  Bank,  doubtless  better  in- 
formed than  most  as  to  the  probabilities,  sold  out  the  Lehigh  Coke 
Co.  to  a  nominee  of  the  H.  Koppers  Co.,  which  in  turn  immediately 
resold  to  the  Bethlehem  Steel  Co. 

A  still  more  striking  instance,  uncovered  by  the  Bureau  of  Inves- 
tigation under  the  direction  of  Mr.  Garvan,  with  important  aid 
from  the  Department  of  Justice  and  the  Secret  Service,  was  that  of 
the  organization  known  as  "The  Chemical  Exchange  Association." 
The  purpose,  and  for  a  time  the  effect,  of  this  enterprise  was  to 
corner  the  supply  in  the  United  States  of  phenol,  an  essential  of 
the  explosive  industry,  and  to  prevent  its  use  for  the  manufacture 
of  high  explosives  (picric  acid  and  trinitrotoluol,  or  T.N.T.).  This 
undertaking  was  apparently  initiated  by  Dr.  Albert,  the  financial 
adviser  of  the  German  Government  in  this  country,  in  direct  col- 
laboration with  Von  Bernstorff.  Dr.  Albert  carried  out  the  scheme 
through  Dr.  Hugo  Schweitzer,  the  chemist  and  leading  spirit  of 
Bayer  &  Co.  (Inc.),  the  American  agent  of  Bayer,  of  Leverkusen. 
The  outbreak  of  the  war  had  instantly  stopped  the  importation  of 
phenol,  which  was  not  manufactured  to  any  extent  in  this  country. 
Mr.  Thomas  A.  Edison,  who  required  large  supplies  of  phenol  for 
the  manufacture  of  his  phonograph  records,  which  were  made  of  a 
synthetic  resin  of  which  phenol  and  formaldehyde  were  the  chief 
ingredients,  immediately  set  to  work  to  solve  the  difficulties  in- 
volved in  the  manufacture  of  this  substance.  By  the  most  strenu- 
ous work  the  problem  was  solved  in  his  laboratories  in  a  few  weeks, 
and  he  commenced  the  manufacture  of  very  considerable  quanti- 
ties, producing  a  large  surplus  beyond  his  own  requirements.  This 
surplus  would  normally  have  supplied  the  means  for  the  manu- 
facture of  fairly  large  quantities  of  the  most  valuable  explosives. 
To  prevent  this.  Dr.  Schweitzer,  on  June  22,  191 5,  entered  into  a 
contract  with  the  American  Oil  &  Supply  Co.,  which  was  the  selling 
agency  of  the  Edison  works,  for  practically  the  entire  surplus  of 
phenol  available  for  sale.  As  security  for  the  faithful  performance 
of  this  contract.  Dr.  Schweitzer  put  up  1 100,000  in  cash,  which 
was  furnished  to  him  by  Dr.  Albert,  and  also  a  $25,000  surety  com- 
pany bond.    A  week  later  Dr.  Schweitzer  made  a  contract  with  the 


The  CHEMICAL    FOUNDATION,    Inc. 

Heyden  Chemical  Works  (a  mere  branch  of  the  German  house  of 
Chemische  Fabrik  von  Heyden,  of  Radebeul),  of  which  George 
Simon,  a  German  subject,  was  the  manager,  by  which  the  entire 
supply  of  phenol  thus  purchased  was  to  be  taken  by  the  Heyden 
company  and  converted  into  salicylic  acid  and  other  harmless 
medicinal  and  flavoring  products.  The  arrangement  was  that  the 
Heyden  works  were  to  return  to  Schweitzer  i  pound  of  salicylic 
acid  for  each  pound  of  phenol  and  keep  the  surplus  of  the  con- 
verted product.  This  involved  a  very  large  profit  for  both  parties. 
In  the  meantime,  to  avoid  doing  business  under  his  own  name, 
Schweitzer  registered  as  a  trade  name  the  "Chemical  Exchange 
Association,"  which  was  described  as  a  copartnership  consisting  of 
himself  and  Richard  Kny.  Kny  was  the  father-in-law  of  George 
Simon  of  the  Heyden  Chemical  Co.,  and  was  the  ostensible  pro- 
prietor of  the  Kny-Scheerer  Co.,  one  of  the  most  important  manu- 
facturers in  this  country  of  surgical  instruments.  This  company, 
like  the  Heyden  Chemical  Works,  was  a  purely  German-owned 
concern,  and  both  have  since  been  taken  over  by  me. 

The  net  result  of  all  this  was  a  profit  to  the  Chemical  Exchange 
Association  of  $816,000,  which  was  apparently  equally  divided 
between  Schweitzer  and  Kny.  Schweitzer's  share  of  the  profits 
seems  to  have  gone  straight  to  the  German  Government,  but  for 
some  unexplained  reason  Kny  appears  to  have  been  allowed  to 
keep  his.  The  attempt  to  prevent  the  use  in  explosive  manufacture 
of  American  phenol  was  completely  successful  for  a  time.  The 
success  of  the  venture  was  celebrated  in  the  latter  part  of  1916  by 
a  dinner  given  by  Schweitzer  and  Kny  at  the  Hotel  Astor  in  honor 
of  Dr.  Albert.  Among  other  guests  were  George  Simon,  F.  A. 
Borgemeister,  Norvin  R.  Lindheim,  and  Capt.  Wolf  von  Igel,  of 
the  German  Embassy — a  typical  gathering  of  the  most  active 
German  propagandists  in  the  country. 

Less  striking  examples  of  the  same  sort  of  thing  might  be  cited 
by  the  score.  An  interesting  instance  is  the  case  of  Dr.  Isaac 
Strauss,  organizer  and  president  of  the  Chromos  Chemical  Co.  Dr. 
Strauss  arrived  in  this  country  in  September,  1914,  apparently 
with  a  direct  mandate  from  the  German  Government  for  propa- 
ganda among  the  Jews.     He  proceeded  to  establish  a  periodical 


The  CHEMICAL    FOUNDATION,    Inc. 

known  as  the  "American  Jewish  Chronicle."  Funds  to  the  amount 
of  $85,000  were  supplied  for  his  activities  by  Dr.  Albert,  and 
$15,000  by  Von  BernstorfT,  and  his  chemical  company,  profiting 
by  the  enormous  war  demand  and  prices,  rapidly  began  to  supply 
further  sinews  of  war.  Shortly  after  the  entry  of  the  United  States 
into  the  war  his  conduct  attracted  the  attention  of  the  military 
authorities,  and  the  ensuing  investigation  led  to  his  internment, 
whereupon  his  Chromos  Chemical  Co.  and  the  "American  Jewish 
Chronicle"  were  taken  over  by  me. 

At  the  time  when  I  took  office  it,  of  course,  became  the  duty  of 
all  companies  in  which  any  alien  enemies  held  stock  to  report  such 
ownership.  About  half  of  those  American  chemical  enterprises 
which  are  now  known  to  be  German  owned,  complied  more  or  less 
promptly  with  this  requirement.  The  rest,  mostly  relying  upon 
pretended  transfers  by  which  the  stock  had  ostensibly  been  put  in 
the  hands  of  American  citizens,  paid  no  attention  to  the  act  until 
the  activities  of  the  Bureau  of  Investigation  had  disclosed  the  true 
facts.  In  some  cases,  however,  the  camouflage  which  concealed  the 
true  ownership  was  of  a  much  subtler  and  more  effective  descrip- 
tion. In  the  case  of  more  than  one  of  the  companies  which 
promptly  reported  themselves  as  entirely  German  owned,  measures 
had  been  taken  to  transfer,  to  companies  which  were  presumably 
beyond  the  reach  of  the  trading  with  the  enemy  act,  the  essential 
value  of  the  German  property  and  business. 

The  most  conspicuous  instance  of  this  method  was  Bayer  &  Co. 
(Inc.).  This  company  at  an  early  date  reported  all  its  stock  as 
held  by  one  of  the  officers,  Mr.  Seebohm,  for  three  trustees  who  in 
turn  held  for  the  benefit  of  the  German  parent  house.  It  was,  on 
the  whole,  the  most  important  of  all  the  German  branches.  Be- 
sides representing,  as  sales  agent,  one  of  the  three  equal  giant  con- 
cerns at  the  head  of  the  German  industry,  it  was  the  only  German 
branch  which  had  established  any  considerable  manufacture  in  this 
country.  ,  Through  the  purchase  of  the  stock  of  the  Hudson  River 
Aniline  Works,  it  had  acquired  and  greatly  expanded  a  consider- 
able plant  near  Albany,  N.  Y.,  in  which  it  produced  a  few  of  the 
simpler  coal-tar  colors  and  considerable  quantities  of  pharmaceu- 
ticals, especially  the  most  valuable  single  product  of  the  German 


The  CHEMICAL   FOUNDATION,    Inc. 

house — the  drug  known  throughout  the  world  by  its  trade  name  of 
Aspirin.  This  was  a  patented  coal-tar  product  on  which  enormous 
profits  had  been  made.  Practically  the  entire  management  of  this 
company  was  in  the  hands  of  German  subjects.  The  leading  spirit, 
Dr.  Hugo  Schweitzer,  was,  as  has  been  stated,  among  the  most 
ardent  propagandists  and  German  agents  in  the  country.  The 
Albany  plant  represented  the  expenditure  of  many  hundred  thou- 
sand dollars,  and  the  enterprise  was  exceedingly  flourishing. 

To  conceal  the  profits  for  the  purpose  of  taxation  another  com- 
pany was  organized,  known  as  the  Synthetic  Patents  Co.  (Inc.),  all 
the  stock  of  which  was  also  held  by  the  German  concern,  to  which 
were  conveyed  all  the  American  patents  of  the  German  house, 
approximately  1,200  in  number,  and  all  the  real  estate,  including 
the  plant.  By  contracts  between  Bayer  &  Co.  (Inc.)  and  Synthetic 
Patents  Co.  (Inc.)  almost  all  of  the  profits  of  the  former  were 
diverted  to  the  latter  in  the  form  of  rentals  and  royalties.  The 
investigation  also  covered  a  number  of  less  legitimate  evasions  of 
the  tax  laws,  and  resulted  in  the  recovery  of  a  large  sum  by  the 
Treasury. 

The  militant  German  character  of  the  men  in  control  of  this 
company  was  so  obvious  that  the  ease  with  which  they  surrendered 
its  stock  was  a  matter  of  some  surprise.  The  explanation  was  not 
unearthed  until  the  very  thorough  examination  of  the  company's 
affairs  by  the  Bureau  of  Investigation  had  proceeded  to  great 
lengths.  It  was  then  ascertained  that  on  the  entrance  of  the  United 
States  into  the  war  the  men  in  control  of  the  company  had  foreseen 
the  danger  of  sequestration  of  the  property.  In  casting  about  for  a 
means  of  meeting  this  emergency  they  hit  upon  a  small  company 
which  had  recently  been  organized  in  Connecticut  to  manufacture 
dyes.  This  was  the  Williams  &  Crowell  Co.,  established  by  two 
gentlemen  who  had  some  knowledge  but  little  capital.  They  had 
succeeded  in  producing  two  or  three  valuable  sulphur  colors,  no- 
tably one  highly  suitable  for  khaki,  of  which  enormous  quantities 
were  obviously  going  to  be  required.  The  situation  of  these  gentle- 
men was  such  that,  although  their  company  had  been  able  to  pro- 
duce profits  out  of  all  proportion  to  its  capitalization,  they  were 
not  unwilling  to  sell,  and  accordingly  the  idea  was  conceived  of 

[29] 


The  CHEMICAL    FOUNDATION,    Inc. 

buying  this  company  with  a  view  to  the  gradual  transfer  to  it  of 
such  of  the  facilities  of  Bayer  &  Co.  (Inc.)  as  could  be  turned  over. 
The  plan  was  laid  before  the  counsel  of  the  company,  Mr.  Charles 
J.  Hardy,  of  New  York,  who  was  the  chief  adviser  of  most  of  the 
German  houses  in  this  line  of  business.  He  appears  to  have  advised 
that  the  company  itself  could  not  safely  make  the  purchase  owing 
to  the  danger  of  its  being  taken  over  by  the  Government,  and  that 
for  the  same  reason  the  stock  of  the  Williams  &  Crowell  Co.  should 
not  be  bought  by  the  Bayer  directors  themselves,  since  they  were 
alien  enemies.  At  his  suggestion  a  new  corporation,  known  as 
Williams  &  Crowell  Color  Co.  (Inc.),  was  organized  in  New  York 
and  the  stock  taken  in  the  names  of  American  citizens.  Williams 
&  Crowell  Co.  was  at  this  time  making  profits  at  the  rate  of  $50,000 
a  month  and,  with  the  aid  of  the  scientific  and  business  knowledge 
which  could  be  supplied  by  the  Bayer  staff,  was  in  a  fair  way  to 
immediate  and  immense  success.  Indeed,  by  this  simple  method,  it 
would  have  been  possible  under  our  very  noses  to  drain  the  life* 
blood  out  of  Bayer  &  Co.  and  to  transfuse  it  into  the  new  organiza- 
tion, which  the  Alien  Property  Custodian  apparently  could  not 
touch.  The  purchase  of  Williams  &  Crowell  Co.,  however,  re- 
quired a  substantial  sum  in  cash,  approximately  1 100,000,  and  it 
was  at  last  possible  to  prove  that  the  1 100,000  thus  paid  was 
money  of  Bayer  &  Co.  (Inc.),  and,  therefore,  of  the  German  par- 
ent house. 

This  was  ascertained  only  after  the  Bureau  of  Investigation  had 
discovered  that  the  treasury  of  Bayer  &  Co.  (Inc.)  was  one  of  the 
great  sources  from  which  German  propaganda  funds  in  this  coun- 
try were  derived.  The  parent  German  house  had  enormous  busi- 
ness connections  all  over  the  world.  It  supplied  immense  quanti- 
ties of  its  products  to  the  east,  especially  to  China.  After  the  out- 
break of  the  war,  in  191 5,  payments  for  these  goods  could  not  be 
transmitted  directly  to  Germany.  As  many  of  the  goods  had  been 
sold  on  long  credit,  very  large  sums  still  remained  payable  to  the 
German  house  many  months  after  deliveries  had  ceased.  The 
eastern  debtors  of  the  German  house  were,  therefore,  directed  to 
make  their  payments  to  Mr.  Seebohm,  of  Bayer  &  Co.  (Inc.),  of 

Do] 


The  CHEMICAL    FOUNDATION,    Inc. 

New  York.  These  funds,  amounting  to  millions,  were  accordingly 
received  by  him  and  disposed  of  without  being  put  through  the 
books  of  Bayer  &  Co.  (Inc.).  What  became  of  most  of  them  can 
not  now  be  ascertained,  as  all  of  such  records  as  may  have  been 
kept  were  promptly  destroyed.  It  was  possible,  however,  to 
demonstrate  that  part  of  the  payment  for  the  Williams  &  Crowell 
stock  came  from  this  source.  I  accordingly  insisted  that  the  stock 
be  turned  over  to  Bayer  &  Co.  (Inc.).  This  was  done,  and  the 
Williams  &  Crowell  Co.  thus  formed  a  part  of  the  assets  of  Bayer 
&  Co.  (Inc.)  at  the  time  of  the  sale  of  the  latter. 

Among  other  interesting  facts  in  regard  to  Bayer  &  Co.  (Inc.) 
disclosed  by  the  investigation  was  the  great  care  exercised  by  the 
parent  house  to  restrain  the  manufacture  of  dyes  by  its  American 
subsidiary.  The  purpose  apparently  was  to  limit  this  manufacture 
absolutely  to  colors  in  which  genuine  American  manufacture  was 
already  well  established.  The  German  house  was  very  glad 
to  increase  in  this  manner  the  competition  with  which  the  Ameri- 
can infant  industry  had  to  struggle,  but  it  was  determined 
that  American  manufacture  in  other  lines  should  not  be  com- 
menced, even  under  its  own  control.  When  the  cessation  of  im- 
ports after  19 14  threatened  a  dye  famine  in  this  country,  Bayer  & 
Co.  (Inc.)  commenced  to  manufacture  a  few  new  colors,  or  rather, 
colors  which  were  new  to  the  American  industry.  No  sooner  did 
this  reach  the  ears  of  the  German  house  than  the  most  peremptory 
letters  were  written,  absolutely  forbidding  any  further  extension 
of  the  business  in  this  line.  The  enormous  profits  possible  from 
such  manufacture  had  no  weight  with  the  Germans  when  compared 
with  the  risk  that  such  manufacture  might  aid  the  development 
of  a  real  American  industry. 

The  stock  of  Bayer  &  Co.  (Inc.)  and  of  Synthetic  Patents  Co. 
was  sold  by  me  at  public  auction,  the  successful  bidder  being  the 
Sterling  Products  Co.,  a  West  Virginia  corporation  dealing  in  pro- 
prietary medicines.  This  company  had  previously  agreed  to  dis- 
pose of  the  dye  plant  and  patents,  in  case  it  secured  the  property, 
to  Grasselli  Chemical  Co.,  one  of  the  largest  makers  of  heavy 
chemicals  in  the  country.    The  price  paid  was  $5,310,000,  plus 

DO 


The  CHEMICAL    FOUNDATION,    Inc. 

back  taxes  and  other  obligations  of  many  hundred  thousands  more. 
Both  purchasing  companies  appear,  on  careful  investigation,  to  be 
thoroughly  American. 

Two  other  of  the  American  branches  of  the  six  great  German  dye 
companies  were  also  taken  over  at  the  outset.  These  were  the 
Berlin  Aniline  Works  and  Kalle  &  Co.  These  companies  were, 
however,  little  more  than  shells,  each  consisting  almost  solely  of  a 
selling  organization  without  plant  or  other  valuable  fixed  capital. 
In  the  case  of  the  Berlin  Aniline  Works,  there  was  an  attempt  to 
duplicate  on  a  small  scale  the  Williams  &  Crowell  episode,  but  the 
resources  available  were  insufficient.  Neither  of  these  companies 
accordingly  had  anything  of  great  value  to  sell,  and  it  has  therefore 
been  deemed  the  wiser  course  to  liquidate  them.  The  patents  of 
the  German  concerns  were  in  each  case  held  in  its  own  name  and 
not  transferred  to  the  American  branch. 

Having  taken  over  these  three  of  the  six  American  representa- 
tives of  the  German  giants,  my  activities  in  this  direction  seemed 
to  have  been  brought  to  a  halt.  The  other  three  did  not  report  any 
German  ownership  and  on  a  preliminary  investigation  seemed  to 
be  American  owned.  A  very  careful  examination  of  all  available 
materials,  however,  sufficed  to  raise  sufficient  doubt  in  each  case  to 
force  the  company  in  question  to  offer  to  submit  its  entire  books 
and  records  to  our  inspection,  and  to  provide  an  audit  at  its  own 
expense.  An  extremely  thorough  investigation  was  thus  made 
possible,  and  in  each  case  it  has  resulted  in  a  demonstration  that 
the  stock  of  the  branch  was  actually,  in  part  at  least,  German 
owned. 

In  its  relation  to  the  American  industry,  the  most  important  of 
these  companies  was  the  Cassella  Color  Co.  This  concern,  the 
agent  of  Leopold  Cassella  &  Co.  G.  m.  b.  H.,  was  managed  by  W.  J. 
Matheson  and  Robert  A.  Shaw.  Both  of  these  gentlemen  are 
Americans  by  birth  and  tradition,  but  both  of  them  had  been  for 
many  years  wholly  or  chiefly  engaged  in  the  business  of  marketing 
the  products  of  the  Cassella  works.  The  stock  stood  on  the  books 
of  the  company  in  their  name,  and  appeared  to  have  been  pur- 
chased for  actual  cash  at  par  in  191 3.  The  transcendent  impor- 
tance of  this  company  was  due  to  two  facts:  First,  that  it  had 

n32: 


The   CHEMICAL    FOUNDATION,    Inc. 

apparently  been  absorbed  by  the  National  Aniline  &  Chemical  Co., 
Inc.,  which  up  to  the  present  has  been  by  far  the  largest  Ameri- 
can manufacturer  of  dyes;  and,  secondly,  that  the  headship  of  the 
new  all-inclusive  German  cartel,  including  all  the  great  companies, 
is  vested  in  Mr.  Carl  von  Weinberg,  who  was  for  many  years  presi- 
dent of  Leopold  Cassella  &  Co.,  and  closely  associated  with  Messrs. 
Matheson  and  Shaw.  The  importance  of  these  facts  was  empha- 
sized when  the  former  Cassella  organization  became  the  selling 
department  of  the  National  Aniline  &  Chemical  Co.,  and  when 
Mr.  Matheson  assumed  its  presidency.  A  storm  of  rumor  imme- 
diately arose,  and  it  was  suggested  to  me  from  every  side  that  the 
National  company  was  at  least  in  part  German  owned.  The  facts, 
however,  were  found  to  be  as  follows:  Prior  to  191 3  the  majority 
of  the  stock  of  the  Cassella  Co.  of  New  York  was  owned  by  the 
German  house.  In  that  year  the  antitrust  suits  above  referred  to 
convinced  all  parties  interested  that  it  was  unsafe  to  allow  the 
New  York  agency  to  continue  even  in  part  to  be  owned  by  a 
member  of  the  German  trust.  Accordingly,  the  remaining  stock  was 
transferred  to  Messfs.  Matheson  and  Shaw  and  paid  for  in  cash. 
An  option  was,  however,  reserved.  This  was  reduced  to  writing 
so  far  as  it  conferred  upon  the  German  house  the  right  to  take  the 
stock  at  the  book  value  on  the  death  of  either  Matheson  or  Shaw. 
It  was,  however,  orally  agreed  that  the  stock  might  be  taken  on 
the  same  basis  at  any  time.  In  the  meantimie  the  contract  between 
the  German  and  American  companies  was  so  framed  that  the 
profits  of  the  company  continued  to  be  divided  as  before,  57  per 
cent  going  to  the  German  house  and  43  per  cent  to  the  American 
house.  The  sale,  therefore,  made  substantially  no  difference  in  the 
relative  rights  of  the  parties.  Messrs.  Matheson  and  Shaw  gained 
nothing  which  they  did  not  already  have  in  the  way  of  theoretical 
control  of  the  American  house.  The  German  company  retained 
complete  practical  control  of  the  American  house  because  it  could 
at  any  moment,  by  withdrawing  supplies,  render  the  American 
business  Worthless.  The  American  patents  owned  by  the  German 
house  had  been  assigned  to  the  American  company.  In  most  cases, 
however,  reassignments  had  been  executed,  but  not  recorded,  so 
that  the  real,  though  not  the  ostensible,  ownership  of  the  patents 

D33 


The   CHEMICAL    FOUNDATION,    Inc. 

was  in  fact  still  vested  in  the  Germans.  The  correspondence  shows 
an  understanding,  the  legal  effect  of  which  seems  to  be  to  continue 
the  German  ownership  to  the  extent  of  57  per  cent  in  the  American 
company,  and  I  have  accordingly  demanded  and  taken  over  57  per 
cent  of  the  stock. 

When  the  dye  famine  began  in  1914,  Messrs.  Matheson  and 
Shaw  determined  to  commence  manufacturing,  and  for  that  pur- 
pose organized  the  Century  Colors  Corporation,  this  name  being 
selected  in  order  to  retain  the  C.  C.  C.  trade-mark  of  the  Cassella 
goods.  This  company  was  organized  with  a  capital  of  only  $500, 
and  Messrs.  Matheson  and  Shaw  took  all  the  stock.  The  opera- 
tions of  the  company  were  financed  to  a  considerable  extent  out 
of  the  funds  of  Cassella  Co.  of  New  York. 

In  August,  1917,  Messrs.  Matheson  and  Shaw,  desiring  to  dis- 
sociate themselves  from  the  Cassella  name,  caused  the  Century 
Colors  Corporation  to  purchase  from  the  Cassella  Co.  all  its  tan- 
gible assets.  On  the  same  date  the  capital  stock  was  increased 
from  I500  to  |20o,ooo,  Messrs,  Matheson  and  Shaw  paying  in  the 
difference.  The  tangible  assets  represented  everything  owned  by 
the  Cassella  corporation  except  its  patents,  good  will,  and  the  con- 
tract with  Leopold  Cassella,  G.  m.  b.  H.,  for  the  sale  and  purchase 
of  the  German  products.  On  September  11,  19 17,  Messrs.  Mathe- 
son and  Shaw  sold  to  the  National  Aniline  &  Chemical  Co.,  Inc., 
all  of  the  stock  of  the  Century  Colors  Corporation.  Under  this 
contract,  Messrs.  Matheson  and  Shaw  agreed  to  subscribe  for 
|20o,ooo  worth  of  the  National  company's  stock  and  to  place  their 
own  services  at  the  disposal  of  the  National,  in  return  for  which 
the  National  company  agreed  to  give  them  4,000  full  paid  shares 
of  preferred  stock  and  40,000  shares  of  common  stock,  having  no 
par  value.  It  was  also  agreed  that  the  existence  of  the  Century 
Colors  Corporation  should  be  continued  for  at  least  one  year.  At 
this  time,  in  explaining  the  failure  to  convey  the  Cassella  com- 
pany's intangible  assets,  Messrs.  Matheson  and  Shaw  stated  in  a 
letter  to  the  National  company  that  they  did  not  feel  at  liberty 
to  dispose  of  the  Cassella  company's  intangible  assets  without  first 
consulting  the  German  house. 

After  this  sale  to  the  National,  the  personnel  taken  over  from 

D4] 


The  CHEMICAL    FOUNDATION,    Inc. 

the  Cassella  and  Century  Colors  companies  rapidly  became  in- 
creasingly important  in  the  National  organization.  When  Mr. 
Matheson  assumed  the  presidency,  the  Century  staff  became  to  all 
intents  and  purposes  the  National  sales  department.  All  this  un- 
doubtedly gave  to  the  new  organization  a  color  which  afforded 
considerable  justification  to  the  rumors  of  German  ownership. 
Accordingly,  the  correspondence  was  examined  with  the  utmost 
care.  This  correspondence,  including,  as  it  does,  many  of  the  letters 
which  passed  between  Messrs.  Shaw  and  Matheson  themselves 
at  a  time  when  neither  could  have  imagined  that  their  transac- 
tions would  be  under  investigation,  shows  that  at  the  time  of  the 
sale  to  the  National,  both  desired  not  to  sacrifice  their  German 
connection,  and  that  neither  believed  with  any  great  confidence  in 
the  success  of  the  American  manufacturing  industry,  though  they 
may  have  believed  that  the  formation  of  the  National  company 
offered  an  opportunity  for  success  in  America  not  theretofore 
available. 

In  October,  1917,  the  Cassella  Color  Co.,  in  spite  of  the  feeling 
previously  expressed  by  Messrs.  Matheson  and  Shaw  that  they 
could  not  properly  transfer  any  of  its  intangible  assets  without  con- 
sulting the  German  house,  transferred  to  the  National  company 
a  number  of  important  patents.  This  was  done  without  regard  to 
the  existence  of  the  unrecorded  reassignments  to  the  German 
house.  This  transfer  appeared  to  be  invalid,  and  these  patents, 
together  with  all  other  patents  known  to  be  the  property  of  the 
German  house,  have  accordingly  been  demanded  and  are  vested 
in  the  Alien  Property  Custodian. 

At  the  present  time  there  appears  to  be  no  German  ownership 
in  the  stock  of  the  National  Aniline  &  Chemical  Co.,  Inc.;  the 
great  majority  of  the  stock  is  held  by  the  following:  Schoellkopf 
Aniline  &  Chemical  Works  (or  its  stockholders,  chiefly  members 
of  the  Schoellkopf  family) ;  General  Chemical  Co. ;  Barrett  &  Co. ; 
Semet-Solvay  Co.;  W.  Beckers  Aniline  Works;  W.  J.  Matheson; 
Eugene  Meyer,  Jr. 

A  complete  working  majority  of  the  stock  has  been  placed  in 
the  voting  trust  of  which  the  trustees  are  as  follows:  Wm.  H. 
Nichols,  president  of  the  General  Chemical  Co.;  H.  S.  Handy,  of 

1:353 


The  CHEMICAL    FOUNDATION,    Inc. 

the  Semet-Solvay  Co.;  Wm.  H.  Childs,  president  of  the  Barrett 
Co.;  W.  J.  Matheson;  Eugene  Meyer,  Jr. 

A  contract  has  been  entered  into  which  will  result  in  the  gradual 
elimination  by  purchase  of  the  Beckers  interest,  which  has  been 
thought  desirable  because  of  Dr.  Beckers'  German  origin.  The 
Cassella  Color  Co.,  of  New  York,  has  been  partially  liquidated  and 
its  stock  has  been  reduced  from  $200,000  to  $500.  The  taking 
over  of  57  per  cent  of  this  stock  will  at  least  permit  the  elimina- 
tion of  the  Cassella  name. 

The  American  branch  of  the  great  Hoechst  Co.  had  for  many 
years  been  conducted  by  Mr.  Herman  A.  Metz.  Prior  to  19 12,  the 
New  York  corporation  was  known  as  H.  A.  Metz  (Inc.),  and  a 
majority  of  its  stock  was  always  owned  by  the  parent  house.  In 
that  year  the  German  company  took  over  all  but  10  shares  of 
the  minority  stock  which  had  previously  stood  in  the  name  of  Mr. 
Metz,  leaving  him  the  record  owner  of  these  10,  the  only  shares 
not  held  by  them.  At  the  same  time  the  name  of  the  New  York 
Corporation  was  changed  to  Farbwerke-Hoechst,  so  that  the  value 
of  the  good  will  might  be  firmly  fixed  in  the  German  name.  At 
about  this  time  the  antitrust  proceedings  above  referred  to  were 
commenced  against  these  companies  also.  Mr.  Metz  settled  for 
$40,000  the  suit  commenced  against  his  company,  and  proceeded 
to  make  strong  representations  to  the  German  house  to  the  effect 
that  the  stock  ought  to  be  owned  by  him  so  that  it  could  be  as- 
serted that  the  German  house  was  no  longer  doing  business  in 
America.  A  prolonged  negotiation  ensued,  the  Germans  being 
very  reluctant  to  make  any  change.  At  last,  in  the  summer  of 
1 91 3,  it  was  arranged  that  the  1,990  shares  held  by  the  German 
concern  should  be  transferred  on  the  books  to  Mr.  Metz;  that  in 
return  he  should  execute  a  demand  promissory  note  without  in- 
terest for  the  sum  of  $597,000;  that  the  note  should  be  delivered 
to  the  German  company  and  the  stock,  together  with  a  suitable 
transfer  properly  executed,  should  be  deposited  to  the  sole  order  of 
the  German  concern  in  a  Montreal  bank,  as  security  for  the  note. 

At  this  time  and  for  many  years  previous  the  American  com- 
pany had  been  operating  under  a  contract  by  which  the  German 
house  appointed  it  its  sole  American  sales  agent  and  agreed  to 

[363 


The   CHEMICAL    FOUNDATION,    Inc. 

furnish  it  with  goods,  in  return  for  which  the  profits  were  to  be 
divided  according  to  an  arbitrary  scale,  irrespective  of  stock  own- 
ership. Under  this  arrangement  the  Germans  were  to  have  one- 
half  the  profits  of  the  color  business  and  75  per  cent  of  the  profits 
of  the  pharmaceutical  business,  which,  owing  to  the  development 
of  salvarsan  and  novocaine,  had  become  of  great  importance.  In 
return,  and  as  a  check  on  possible  overcharges  by  the  German 
house,  Mr.  Metz  was  to  receive  a  percentage  of  their  profits  on  the 
sales  to  the  American  company.  An  irrevocable  power  of  attor- 
ney was  given  to  Mr,  Metz  to  vote  the  stock  owned  by  the  German 
company  in  the  New  York  house  and  an  option  was  reserved  to  the 
German  company  to  purchase  the  stock  in  the  event  of  Mr.  Metz's 
death  or  retirement. 

This  contract  was  continued  unaltered  after  the  stock  trans- 
action of  19 1 3,  and  under  it  the  profits  were  divided  as  long  as  it 
was  possible  to  remit  moneys  to  Germany.  There  was  also  an  oral 
understanding  between  the  parties  that  the  note  should  not  be 
payable  except  out  of  the  stocks  or  its  proceeds,  and  that  it  could 
not  be  demanded  as  long  as  Mr.  Metz  should  remain  president  of 
the  company.  It  will  thus  be  seen  that  the  whole  stock  dealing 
produced  no  change  whatever  in  the  rights  of  the  parties. 
After  it,  as  before,  the  share  in  the  profits  of  each  party  remained 
the  same;  power  to  secure  and  pass  title  to  the  certificates  re- 
mained as  before  in  the  hands  of  the  German  company  alone;  the 
voting  power  remained  as  before  in  Mr.  Metz's  hands;  in  fact  none 
of  the  incident  of  ownership  was  in  any  way  affected  by  the  trans- 
action. 

At  the  outset  Mr.  Metz  filed  reports  stating  the  existence  of  the 
note  and  the  fact  that  certain  stock  was  deposited  as  security  for 
the  same,  but  it  was  not  until  the  ascertainment  of  the  entire  his- 
tory of  the  transaction  that  the  proof  could  be  obtained  that  the 
transfer  was  not  and  was  not  intended  to  be  of  any  effect.  At  last, 
however,  the  investigation  thoroughly  demonstrated  this,  and  the 
stock  has  accordingly  been  taken  over  by  me. 

During  the  course  of  the  year  19 16,  Mr.  Metz,  finding  that  he 
could  no  longer  secure  from  Germany  supplies  of  pharmaceuticals, 
especially  salvarsan  and  novocaine,  which  formed  the  most  profit- 

D73 


The  CHEMICAL    FOUNDATION,    Inc. 

able  part  of  his  business,  determined  to  enter  upon  their  manufac- 
ture in  this  country.  Correspondence  with  the  German  house 
proving  unsatisfactory,  he  sent  his  brother.  Dr.  G.  P.  Metz,  to 
Germany  to  secure  the  necessary  permission.  This  permission 
was  refused,  but  the  latter  came  home  with  a  sufficient  knowledge 
to  permit  the  commencement  of  the  work.  A  new  company  was 
organized  under  the  name  of  H.  A.  Metz  Laboratories  (Inc.),  a 
New  York  corporation,  and  this  company  commenced  the  manu- 
facture of  these  two  invaluable  medicinals,  which  has  been  con- 
tinued since  our  entrance  into  the  war  under  license  from  the 
Federal  Trade  Commission. 

The  agency  of  the  largest  of  all  the  German  houses,  the  great 
Badische  Co.  of  Ludwigshaven,  presents  perhaps  the  most  striking 
example  of  the  German  methods  of  camouflage  as  applied  to  stock 
ownership.  For  many  years  this  company  has  been  represented  in 
this  country  by  Mr.  Adolf  Kuttroff,  who  was  born  in  Germany, 
but  came  to  this  countr}^  at  a  very  early  age,  and  was  naturalized 
in  1867.  In  a  succession  of  partnerships  and  incorporations  with 
various  members  of  the  Pickhardt  family  this  gentleman  has  al- 
ways conducted  the  business  of  the  Badische  in  the  United  States. 
In  1906,  shortly  after  the  formation  of  the  first  German  dyestuff 
cartels,  when  the  parent  houses  of  Bayer  and  Badische  became 
members  of  the  same  body,  an  attempt  was  made  to  combine  their 
agencies  in  this  country.  A  company  called  the  Continental  Color 
&  Chemical  Co.  was  organized  in  New  York  and  took  over  the 
Badische  business  of  Kuttroff  &  Pickhardt,  and  the  Bayer  business 
of  the  Bayer  Co.'s  New  York  subsidiary,  then  known  as  Farben- 
fabriken  of  Elberfeld.  At  the  end  of  the  year,  dissensions  led 
to  the  dissolution  of  this  company  and  the  Badische  agency  was 
then  taken  over  by  the  Badische  Co.  of  New  York,  a  New  York 
corporation.  The  stock  of  this  company  appeared  to  be  entirely 
owned  by  Messrs.  Kuttroff  &  Pickhardt,  and  on  its  books  con- 
tinued so  down  to  its  dissolution  in  19 17,  except  for  small  quan- 
tities of  stock  issued  from  time  to  time  to  the  principal  subsidiary 
officers  of  the  company.  All  this  stock,  however,  was  held  subject 
to  an  option  permitting  the  German  company  to  acquire  it  at  par, 
and  there  was  an  oral  understanding  that  no  dividends  exceeding 

D83 


The   CHEMICAL    FOUNDATION,    Inc. 

6  per  cent  should  be  paid.  The  balance  of  the  profits,  which  were 
considerable,  was  distributed  according  to  an  arbitrary  scale  ar- 
ranged by  Mr.  KuttrolT  from  time  to  time  among  the  chief  officers 
of  the  company.  The  company  was  dissolved  in  191 7  and  a 
new  corporation  organized  under  the  name  of  Kuttroff  &  Pick- 
hardt  (Inc.),  which  ostensibly  took  over  only  the  physical  stock 
in  trade  of  the  old  company  and  its  officers.  The  stock  of  this 
new  company  is  held  substantially  in  the  same  proportions  by  the 
same  persons  who  held  the  stock  of  the  Badische  Co.  of  New 
York. 

It  will  thus  be  seen  that  the  ostensible  stock  ownership  of  this 
agency  remained  unchanged  from  1909  until  after  our  entrance 
into  the  war.  It  had  thus  been  so  arranged  that  no  change  was 
necessary  in  order  to  avoid  the  Sherman-law  suits,  nor  in  order  to 
escape  the  attentions  of  the  Alien  Property  Custodian  on  casual 
examination  of  the  books.  Indeed,  the  true  facts  were  only  as- 
certained after  a  most  elaborate  analysis  of  the  books  by  highly 
skilled  accountants,  and  of  the  available  correspondence  and  in- 
tercepted cables  by  trained  lawyers.  Suspicion  of  the  company 
was  generally  prevalent,  but  the  first  definite  evidence  was  de- 
rived from  correspondence  obtained  by  the  British  authorities, 
which  demonstrated  that  the  New  York  company  had  been  in  the 
habit  of  asking  for  the  decision  of  the  German  house  on  even 
such  intimate  questions  of  domestic  policy  as  the  increase  or  de- 
crease of  minor  salaries  of  the  stafi".  This  correspondence  indi- 
cated a  degree  of  control  far  beyond  that  which  was  attributable 
to  the  mere  power  to  stop  supplies.  It  was  then  ascertained  by 
the  accountants  that  the  original  $25,000  paid  into  the  Treasury 
of  the  company  for  the  first  issue  of  125,000  of  stock  came  out  of 
the  moneys  of  the  German  house  in  the  Continental  Co.  at  the  time 
of  the  liquidation  of  the  latter  concern.  An  intricate  analysis 
also  showed  that  at  a  time  when  the  original  capital  stock  of  the 
New  York  Badische  Co.  was  decreased  the  sums  paid  out  went  not 
to  the  ostensible  stockholders  but  to  the  German  house.  Finally 
it  appeared  that  on  three  separate  classes  of  transactions  very 
large  sums  out  of  the  earnings  of  the  New  York  house  were  trans- 
mitted to  the  German  house  when  there  was  no  possible  obligation 

:393 


The   CHEMICAL    FOUNDATION,    Inc. 

to  do  so,  and  that  this  was  done  by  the  personal  direction  of  Mr. 
Kuttroff  without  consultation  with  the  directors  or  stockholders. 
For  example:  During  the  years  191 5  and  1916  the  sum  of  I701,- 
944.34  was  credited  on  the  books  of  the  German  house  and  subse- 
quently remitted  under  the  head  of  indanthrene  royalties.  The 
company  had  been  selling  for  the  German  house  for  years  its  high- 
grade  indanthrene  dyes  which  it  received  from  the  German  house 
at  fixed  prices  which  did  not  include  the  sums  described  as  royal- 
ties. As  the  goods  were  manufactured  in  Germany  and  nothing 
was  done  to  them  here,  no  royalty,  properly  speaking,  could  pos- 
sibly be  due.  If  any  was  payable,  it  must  have  been  merely  as 
an  enhancement  of  the  price.  There  was  no  understanding  be- 
tween the  companies  to  any  such  effect. 

Obviously,  then,  if  the  companies  had  been  really  independent, 
the  president  of  the  New  York  concern  would  never  have  dared  to 
deprive  his  own  stockholders  of  any  such  sums  without  legal  obli- 
gation and  without  even  consulting  them  beforehand.  In  like 
manner,  in  19 14,  the  sum  of  $477,100  was  credited  and  remitted 
ostensibly  as  a  return  of  advances  made  years  before  by  the  Ger- 
man house  for  expenses  of  the  New  York  concern.  Here,  again, 
there  was  no  previous  understanding  or  present  authorization  re- 
quiring or  permitting  anything  of  the  kind.  At  the  time  the  al- 
leged advances  were  made  by  the  German  house  the  New  York 
company  was  operating  merely  as  an  agency  on  commission. 
There  was  no  conceivable  reason  why  a  part  of  the  agency's  ex- 
penses should  not  have  been  met  by  the  principal  in  the  usual  way. 
Yet  again,  without  consulting  anyone,  Mr.  Kuttroff  caused  these 
large  sums  to  be  taken  out  of  the  hands  of  the  ostensible  stock- 
holders and  put  in  those  of  the  real  owners  of  the  company.  Fi- 
nally, in  the  case  of  the  goods  received  by  the  submarine  Deutsch- 
land,  the  same  process  was  carried  on.  These  goods  when  origi- 
nally received  were  entered  on  the  books  like  all  other  shipments  of 
the  German  house  on  a  sales  basis;  that  is  to  say,  they  were 
treated  as  the  property  of  the  New  York  house,  and  the  German 
house  was  credited  with  the  price,  approximately  $800,000.  Set- 
tlements with  the  custom-house  appear  to  have  been  made  on  this 
basis.    Some  months  afterward  a  profit  of  about  $400,000  had  been 

1:403 


The  CHEMICAL    FOUNDATION,    Inc. 

realized.  The  book  entries  were  then  reversed  so  as  to  bring  the 
transaction  back  to  a  consignment  basis  in  which  the  German 
house  would  be  entitled  to  all  these  profits  except  a  commission. 
This  change  was  made  by  Mr.  Kuttroff  without  the  authority  of 
the  stockholders  or  directors,  and  accordingly  a  sum  of  nearly 
$400,000  was  made  available  for  a  remittance  to  Germany,  and 
was  so  remitted.  These  and  kindred  transactions  have  so  clearly 
demonstrated  that  the  German  company  was  the  real  owner  of  the 
stock  of  the  American  Badische  company  that  a  demand  which  is 
to  be  issued  forthwith  will  be  immediately  complied  with.  This 
demand,  owing  to  the  fact  that  the  company  has  been  dissolved, 
will  result  in  the  taking  over  of  only  the  assets  of  the  company, 
which,  however,  are  considerable,  but  these  will  include  certain 
profits  realized,  since  the  dissolution,  by  the  new  corporation  of 
Kuttroff  &  Pickhardt  (Inc.). 

From  the  foregoing  it  will  be  seen  that  the  American  agent 
companies  bearing  the  names  of  each  of  the  six  great  German  dye 
companies  have  been  taken  over.  This,  it  is  to  be  hoped,  may 
interpose  some  difficulties  in  the  way  of  any  attempt  on  the  part 
of  the  latter  to  reestablish  themselves  in  this  country. 

The  situation  presented  by  the  agencies  of  the  German  dye 
companies  of  the  second  rank  has  been  less  satisfactory.  The 
great  Griesheim  Elektron  Co.  was  represented  in  this  country  by 
two  concerns,  Geisenheimer  &  Co.,  a  partnership  between  Ameri- 
can citizens  now  dissolved,  and  A.  Klipstein,  a  corporation  of  which 
all  the  stock  was  held  by  two  unrelated  Klipstein  families,  all 
citizens.  No  trace  of  real  German  ownership  could  be  discovered, 
after  the  most  prolonged  and  laborious  investigation  both  here 
and  abroad,  by  all  the  departments  interested,  in  either  of  these 
companies,  though  the  business  of  both  had  been  largely  derived 
from  German  sources  throughout  their  existence.  The  house  of 
Weiler  Termeer  was  represented  in  this  country  by  the  Geigy-Ter- 
Meer  Co.,  now  the  Geigy  Co.,  in  which,  prior  to  the  beginning  of 
1917,  the  German  house  owned  20  per  cent  of  the  stock.  This 
stock  was,  however,  transferred  before  our  entrance  into  the  war 
to  the  Swiss  house  of  J.  R.  Geigy  &  Co.,  a  firm  in  good  standing 
with  the  allied  Governments.     It  has  been  impossible  to  ascer- 


The  CHEMICAL    FOUNDATION,    Inc. 

tain  whether  this  transfer  was  in  any  respect  for  the  benefit  of  the 
German  house,  but  in  any  case  the  great  majority  of  the  stock 
of  this  company  is  in  Swiss  and  not  in  German  hands. 

Among  the  chemical  companies  in  which  German  interests  ex- 
isted outside  of  the  dyestuff  business,  by  far  the  most  important 
was  the  Roessler  &  Hasslacher  Chemical  Co.  This  was  a  branch 
of  the  great  Frankfort  gold  and  silver  refining  company  known 
as  the  Deutsche  Gold  und  Silber  Scheide-Anstalt  vormals  Roess- 
ler, and  was  organized  by  Messrs.  Roessler  and  Hasslacher,  two  old 
Scheide-Anstalt  employees,  who  came  to  this  country  to  introduce 
the  goods  of  the  parent  house.  From  the  first,  the  German  con- 
cern and  its  officers  and  employees  owned  about  three-quarters  of 
the  stock  of  the  American  house.  The  latter  prospered  enor- 
mously and  built  up  a  very  large  business.  Besides  selling  the 
products  of  the  Scheide-Anstalt,  consisting  chiefly  of  cyanide  of 
sodium  and  cyanide  of  potassium,  it  built  up  a  very  large  jobbing 
business.  In  1895  the  Niagara  Electro  Chemical  Co.  was  founded 
to  manufacture  metallic  sodium  by  means  of  the  electric  power 
available  in  Niagara  Falls.  The  sodium  thus  produced  was  used 
for  the  manufacture  of  cyanide  of  sodium  in  this  country,  a  busi- 
ness which  immediately  became  exceedingly  profitable.  The  stock 
of  this  company  was  divided  so  that  one-third  of  it  went  to  the 
Scheide-Anstalt,  one-third  to  Roessler  &  Hasslacher,  and  one-third 
to  English  interests.  This  company  had  a  capitalization  of  $100,- 
000,  made  fabulous  profits,  and  for  the  -five  years  before  our  en- 
trance into  the  war  averaged  over  900  per  cent  in  dividends  annu- 
ally. 

Meanwhile  the  Perth  Amboy  Chemical  Works  had  been  es- 
tablished with  a  capital  of  $400,000  to  manufacture  formaldehyde 
and  wood  distillation  products;  1,960  of  the  4,000  shares  of  this 
company  were  held  by  the  Roessler  &  Hasslacher  Co.,  a  similar 
amount  by  another  outside  German  corporation,  the  Holzverkoh- 
lungs  Industrie  A.  G.,  and  a  casting  vote  was  left  in  the  remaining 
80  shares  with  Roessler  &  Hasslacher.  In  the  summer  of  1916  the 
officers  of  the  Roessler  &  Hasslacher  Chemical  Co.  began  to  ask 
the  authorities  of  their  parent  house  to  transfer  to  them  more  of 
the  stock.    The  first  request  was  made  in  a  letter  which  contained 

1422 


The  CHEMICAL    FOUNDATION,    Inc. 

a  distinct  intimation  that  this  change  in  holdings  need  not  be 
permanent.  In  subsequent  letters  they  insisted,  as  reasons  for  the 
proposed  sale,  that  the  political  situation  was  very  acute;  that 
German-owned  property  in  this  country  might  be  sequestered,  and 
that  if  any  of  their  goods  were  to  be  imported  and  were  to  get 
by  the  British  they  would  have  to  be  able  to  say  that  the  company 
which  did  the  importing  was  not  German  owned.  This  proposi- 
tion met  no  response.  On  the  contrary,  the  Scheide-Anstalt  of- 
ficers replied  that  they  did  not  understand  what  Messrs.  Roessler 
&  Hasslacher  wanted;  that  what  they  proposed  must  either  be  a 
real  or  a  pretended  sale;  that  if  a  pretended  sale  was  what  was 
suggested  the  idea  was  dangerous;  and  that  if  a  real  sale  was  meant 
a  price  would  have  to  be  charged  which  Messrs.  Roessler  & 
Hasslacher  would,  under  no  circumstances,  be  willing  to  pay. 
They  then  suggested  that  a  confidential  man  should  be  sent  over 
to  explain  just  what  was  wanted.  The  letters  of  Mr.  Hasslacher 
had,  however,  left  no  doubt  on  this  score,  as  they  had  asked  in  the 
simplest  possible  language  for  a  sale  of  the  stock  and  had  re- 
quested the  Scheide-Anstalt  to  name  their  price. 

In  general  the  letters  outlined  the  proposition  as  clearly  as  it 
could  be  stated,  and  the  Scheide-Anstalt  people  can  not  have 
avoided  fully  understanding  just  what  was  wanted,  except  on  the 
supposition  that  the  letters  didn't  mean  what  they  said  and  that  the 
real  proposition  was  one  which  it  was  dangerous  to  put  on  paper. 
Their  refusal,  at  all  events,  even  to  name  a  price,  was  unequivocal. 
They  said  in  substance,  "rather  than  part  with  'the  best  cow  in 
the  barn,'  we  ought  to  take  every  risk  of  the  political  situation  and 
trust  to  fighting  our  rights  in  free  America."  Notwithstanding 
this  discouraging  statement,  Messrs.  Roessler  &  Hasslacher  did 
send  over  a  confidential  man  as  was  suggested.  This  emissary, 
Mr.  Oscar  R.  Seitz,  a  New  York  lawyer  of  Swiss  descent  with  some 
German  connections,  reached  Frankfort  on  February  i.  He 
brought  no  letters  of  introduction,  power  of  attorney  or  means  of 
identification.  The  Scheide-Anstalt  people  did  not  know  for 
certain  that  a  confidential  man  was  coming,  or  that  if  so,  it  was  to 
be  Mr.  Seitz;  yet  he  says  that  after  a  few  brief  interviews  in 
which  he  offered  no  argument,  other  than  those  which  had  al- 

[43] 


The   CHEMICAL    FOUNDATION,    Inc. 

ready  been  stated  in  the  letters  from  Mr.  Hasslacher  to  his  Ger- 
man intimates,  the  Scheide-Anstalt  people  agreed  to  sell  to  the 
American  representatives  the  following  stock:  3,800  shares  of 
Roessler  &  Hasslacher,  at  200;  140  shares  Niagara  Chemical  Elec- 
tric Co.,  at  400;  80  shares  Perth  Amboy  Chemical  Works,  at  200. 
No  counter-offer  was  apparently  made,  and  there  seems  to  be  no 
hesitation  about  the  price,  nor  was  there  any  suggestion  of  the  pur- 
chase of  the  balance  of  the  German  holdings.  A  wireless  was  then, 
on  February  6,  19 17,  sent  to  the  New  York  office,  and,  upon  this 
wireless,  the  stocks  were  transferred  on  the  books  of  the  companies 
and  the  necessary  $860,000  was  remitted  to  the  German  house. 
The  stocks  thus  sold  carried  with  them  control  of  all  three  of  the 
companies.  The  price  paid  represented  a  book  value  approximately 
twice  as  great,  and  the  average  annual  dividends  for  the  preceding 
five  years  on  the  three  blocks  of  stock  combined  figured  out  at  over 
39  per  cent  on  the  purchase  price.  As  regards  the  Niagara  stock, 
the  book  value  was  nearly  four  times  the  purchase  price,  while 
the  average  dividends  for  five  years  figure  out  an  annual  return 
of  225  per  cent  on  the  purchase  price. 

These  facts,  and  a  host  of  additional  circumstances  likewise 
pointing  inevitably  to  the  conclusion  that  this  sale  was  not  genu- 
ine, were  brought  out  in  a  prolonged  proceeding  conducted  by  my 
representative  before  the  attorney  general  of  the  State  of  New 
York,  who  had  the  power  to  subpoena  witnesses.  In  the  meantime 
the  47  per  cent  of  the  stock  of  the  Roessler  &  Hasslacher  Chemical 
Co.,  which  was  admittedly  still  German  owned,  had  already  been 
taken  over.  I  thereupon  determined,  by  virtue  of  the  authority 
conferred  upon  me  by  the  trading-with-the-enemy  act  and  by  the 
presidential  proclamations  thereunder,  that  the  stock  ostensibly 
transferred  in  February,  19 17,  was  in  fact  still  German  owned;  and 
accordingly  I  thereupon  issued  demands  for  it.  This  proceeding 
will  result  in  the  Americanization  of  the  most  important  German- 
owned  chemical  companies  outside  of  the  dye  industry. 

Next  to  Roessler  &  Hasslacher  in  importance  among  companies 
of  the  same  class  is  the  Heyden  Chemical  Works;  this  was  the 
subsidiary  of  the  Chemische  Fabrik  von  Heyden,  of  Radebeul, 
Germany,  and  manufactures  salicylic  acid  and  its  derivatives, 

1:44] 


The   CHEMICAL    FOUNDATION,    Inc. 

formaldehyde,  saccharin,  the  medicines  usually  known  by  their 
proprietary  names  aspirin  and  urotropin,  benzoate  of  soda,  and 
many  other  valuable  products.  Of  late  years  it  has  become 
enormously  successful.  Prior  to  the  year  1917  all  the  stock  was 
owned  by  the  German  company,  and  in  addition  the  American 
concern  was  tied  by  a  contract  with  its  parent  house  under  which 
all  the  earnings  of  the  American  concern  over  8  per  cent  went  to 
the  German  house  in  payment  for  processes  and  information. 
When  my  investigation  commenced,  all  of  the  stock  except  three 
shares  stood  in  the  name  of  T.  Ellett  Hodgskin,  a  New  York  law- 
yer, who  had  for  some  time  represented  the  firm.  After  consider- 
able examination  it  was  ascertained  that  this  stock,  which  had 
been  transferred  just  before  our  entrance  into  the  war,  had  been 
paid  at  par  with  a  sum  of  $149,000,  borrowed  by  Mr.  Hodgskin 
for  the  purpose  from  Richard  Kny,  father-in-law  of  George  Simon, 
a  German  subject  and  the  manager  of  the  company,  under  an 
agreement  contained  in  a  letter  from  Mr.  Hodgskin  to  the  effect 
that  he  would  thereafter  retransfer  it  at  cost.  Richard  Kny,  it 
will  be  remembered,  was  the  partner  of  Schweitzer  in  the  Chemical 
Exchange  Association,  and  he  was  also  the  ostensible  owner  of  the 
Kny-Scheerer  Chemical  Co.,  which  also  turned  out  to  be  a  purely 
German-owned  concern  and  has  been  taken  over  as  such.  Thor- 
ough investigation  resulted  in  the  practical  admission  that  this 
transfer  was  mere  camouflage,  and  accordingly  the  stock  has 
been  demanded  and  taken  over.  Mr.  Hodgskin  is  now  under 
indictment  for  his  participation  in  similar  proceedings  in  respect 
to  another  company.  This  stock  and  other  rights  of  the  German 
house  in  the  American  company  have  been  sold  at  public  auction 
to  the  Monsanto  Chemical  Works  for  $605,000  plus  taxes  and 
profits  of  191 7  and  1918,  but  the  sale  has  not  yet  been  confirmed 
by  the  sales  committee. 

An  almost  exactly  similar  situation  was  disclosed  by  the  investi- 
gation of  Bauer  Chemical  Co.,  a  much  smaller  concern  manufac- 
turing pharmaceuticals,  especially  the  widely  advertised  "Sana- 
togen"  and  'Tormamint."  In  this  company  also  the  stock,  which 
was  really  the  property  of  the  Berlin  house  of  Bauer  &  Co.,  ap- 
peared by  a  fictitious  transaction  to  have  passed  into  the  hands  of 

1:45] 


The   CHEMICAL    FOUNDATION,    Inc. 

Mr.  Hodgskin.  The  fictitious  character  of  the  transaction  in  this 
company  also  has  been  admitted,  and  the  stock  has  been  taken 
over. 

Another  method  of  concealment  was  disclosed  in  the  investiga- 
tion of  American  Pyrophor  Co.  (Inc.).  This  company  was  organ- 
ized in  December,  19 17,  by  Charles  Ganz,  former  agent  of  the 
Treibacher  Chemische  Werke,  of  Treibacher,  Austria,  and  to  it 
Ganz  transferred,  without  authority,  the  entire  business  of  the 
Treibacher  company  in  this  country,  a  business  consisting  of  the 
manufacture  of  pyrophor,  an  alloy  of  iron  and  cerium,  which,  when 
struck  or  scratched,  produces  fire  and  is  used  for  cigar  lighters,  etc. 
Here,  after  investigation,  the  unauthorized  character  of  the  trans- 
fer was  so  clearly  shown  that  it  was  admitted,  and  upon  demand 
the  stock  of  the  company  was  turned  over.  In  this,  as  in  many 
other  like  cases,  it  was  impossible  to  determine  whether  the  osten- 
sible new  owner  of  the  business  meant  to  keep  it  for  the  alien 
enemies  or  to  steal  it  for  himself. 

In  pharmaceuticals,  the  most  important  concern  in  the  world 
was  that  of  E.  Merck,  of  Darmstadt.  This  was  represented  in  this 
country  by  Merck  &  Co.,  a  New  York  corporation  which  had  an 
enormous  and  very  profitable  business  in  all  kinds  of  medicinal 
preparations.  The  stock  of  this  company  appeared  on  the  books 
to  be  owned  exclusively  by  George  Merck,  a  member  of  the  family 
which  owns  the  house  of  E.  Merck,  of  Darmstadt.  Investigation, 
however,  showed  that  the  profits  of  this  company  had  always  been 
remitted  to  the  German  house  in  a  manner  utterly  inconsistent 
with  the  apparent  stock  ownership,  and  it  now  stands  admitted 
that  the  stock  was  paid  for  with  money  of  the  German  house  and 
belongs  to  the  latter.  Mr.  George  Merck  insists  that  he  is  the  real 
owner  of  one-fifth  of  this  stock  by  virtue  of  the  fact  that  he  owns 
20  per  cent  interest  in  E.  Merck,  of  Darmstadt.  I  am  of  the  opin- 
ion, however,  that  indirect  ownership  of  this  kind  can  not  be  recog- 
nized under  the  trading  with  the  enemy  act,  and  I  have  therefore 
determined  that  the  whole  of  this  stock  is  enemy  owned  and  it  has 
accordingly  been  taken  over. 

In  addition  to  the  above,  I  have  taken  over  all  or  part  of  the 
stock  of  the  following  less  important  companies  engaged  in  various 

n463 


The  CHEMICAL    FOUNDATION,    Inc. 

lines  of  chemical  activity:  Charles  Helmuth  &  Co.  (Inc.);  Inter- 
national Ultramarine  Works;  G.  Siegele  &  Co.;  Williamsburgh 
Chemical  Co.;  New  Brunswick  Chemical  Co.;  Fahlberg  Saccharine 
Co.;  Philipp  Bauer  &  Co.  (Inc.);  Amid-Duron  Co.;  Haarmann-de 
Laire-Schaefer  Co.;  Jarecki  Chemical  Works;  Riedel  &  Co.  (Inc.) ; 
Rohm  &  Haas;  Somerset  Chemical  Co.;  Tropon  Works;  Gersten- 
dorfer  Bros.;  German  Kali  Works;  F.  Ad  Richter  Co.  The  liqui- 
dation of  the  German  interests  in  these  companies  is  proceeding 
in  due  course. 

The  amendment  of  November  4  to  the  trading  with  the  enemy 
act  presented  for  the  first  time  an  opportunity  for  what  appears 
to  me  to  be  the  most  important  piece  of  constructive-  work  which 
has  been  possible  in  my  department.  Until  the  enactment  of  this 
amendment  it  had  not  been  possible  to  take  over  German  patents. 
These  patents,  as  had  been  already  indicated,  formed  a  colossal 
obstacle  to  the  development  of  the  American  dyestuff  industry. 
Evidently  the}^  had  not  been  taken  out  with  any  intention  of 
manufacturing  in  this  country  or  from  any  fear  of  American 
manufacture,  which  the  Germans  apparently  thought  could  not  be 
successfully  carried  on  under  conditions  prevailing  in  this  country 
in  regard  to  costs  and  to  the  supply  of  technicians  and  skilled 
labor.  Upon  consideration,  however,  it  seemed  that  these  patents 
offered  a  possible  solution  for  the  problem,  hitherto  unsolvable,  of 
protecting  the  new  American  dye  industry  against  German  com- 
petition after  the  war.  If  they  were  not  taken  out  in  order  to  pre- 
vent American  competition  they  must  have  been  obtained  as  a 
weapon  against  competing  imports.  If  they  were  sufficient  to  stop 
importation  of  competing  Swiss,  French,  and  English  dyes,  they 
would  presumably  serve,  in  American  hands,  to  stop  the  importa- 
tion of  German  dyes.  This  was  particularly  probable  in  the  case 
of  the  product  patents,  since  most  of  the  coal-tar  dyestuffs  are 
definite  chemical  combinations  to  which  a  product  patent  is  en- 
tirely applicable. 

The  idea  was  accordingly  conceived  that  if  the  German  chemical 
patents  could  be  placed  in  the  hands  of  any  American  institution 
strong  enough  to  protect  them,  a  real  obstacle  might  be  opposed  to 
German  importation  after  the  war,  and  at  the  same  time  the  Ameri- 

1:47:  . 


The  CHEMICAL    FOUNDATION,    Inc. 

can  industry  might  be  freed  from  the  prohibition  enforced  by  the 
patents  against  the  manufacture  of  the  most  valuable  dyestuffs. 
Accordingly,  these  considerations  were  laid  before  various  asso- 
ciations of  chemical  manufacturers,  notably  the  Dye  Institute  and 
the  American  Manufacturing  Chemists  Association.  The  sugges- 
tion was  met  with  an  instantaneous  and  enthusiastic  approval,  and 
as  a  result  a  corporation  has  been  organized  to  be  known  as  the 
Chemical  Foundation  (Inc.),  in  which  practically  every  important 
American  manufacturer  will  be  a  stockholder,  the  purpose  of  which 
is  to  acquire  by  purchase  these  German  patents  and  to  hold  them 
as  a  trustee  for  American  industry,  "for  the  Americanization  of 
such  institutions  as  may  be  affected  thereby,  for  the  exclusion  or 
elimination  of  alien  interests  hostile  or  detrimental  to  the  said 
industries  and  for  the  advancement  of  chemical  and  allied  science 
and  industry  in  the  United  States."  The  voting  stock  is  to  be 
placed  in  a  voting  trust  of  which  the  trustees  are  to  be  the  five 
gentlemen  who  for  months  have  been  acting  as  the  sales  committee 
which  passes  upon  sales  made  by  my  department,  that  is  to  say, 
George  L.  Ingraham  (former  presiding  justice  of  the  Appellate 
Division,  First  Department,  New  York  Supreme  Court) ;  Otto  T. 
Bannard  (president.  New  York  Trust  Co.);  Cleveland  H.  Dodge; 
B.  Howell  Griswold,  Jr.  (senior  partner  of  Brown  Bros.,  bankers, 
Philadelphia);  Ralph  Stone  (president,  Detroit  Trust  Co.),  and 
the  charter  is  so  framed  that  under  the  patents  non-exclusive 
licenses  only  can  be  granted  on  equal  terms  to  all  proper  appli- 
cants, and  must  be  granted  to  the  United  States  free  of  cost.  The 
company  is  capitalized  at  ^500,000,  of  which  $400,000  is  to  be  6 
per  cent  cumulative  preferred  stock  and  $100,000  common  stock, 
also  limited  to  6  per  cent  dividends.  The  first  president  of  the 
Chemical  Foundation  (Inc.)  will  be  Francis  P.  Garvan,  of  the 
New  York  bar,  to  whose  clear  vision  and  indefatigable  industry 
I  am  chiefly  indebted  in  the  working  out  of  this  plan.  By  Execu- 
tive order  obtained  under  the  provisions  of  the  act,  I  have  sold  to 
this  company  for  the  sum  of  $250,000  approximately  4,500  patents, 
the  remaining  $250,000  has  been  provided  for  working  capital  so 
that  the  company  may  be  able  to  commence  immediately  and 
prosecute  with  the  utmost  vigor  infringement  proceedings  when- 

■     US] 


The   CHEMICAL    FOUNDATION,    Inc. 

ever  the  first  German  attempt  shall  hereafter  be  made  to  import 
into  this  country.  The  charter  of  the  corporation  provides  that 
surplus  income  is  to  be  used  for  the  retirement  of  the  preferred 
stock  and  thereafter  for  the  advancement  of  chemical  and  allied 
science  and  industry.  The  price  thus  paid  was  necessarily  deter- 
mined somewhat  arbitrarily;  the  great  majority  of  the  patents 
were  presumably  valueless.  The  value  of  the  remainder  was  en- 
tirely problematical  and  impossible  to  estimate.  Substantially  the 
entire  industry  having  combined  for  the  purpose  of  this  purchase, 
it  would  have  been  impossible  on  public  sale  to  find  as  a  bidder 
any  legitimate  manufacturer.  No  other  bidder  could,  therefore, 
have  been  found  on  public  sale  except  some  speculative  individual 
who  might  have  bought  them  for  purposes  practically  amounting 
to  commercial  blackmail.  The  combination  was  not  objectionable 
to  public  policy  since  it  was  so  organized  that  any  genuine  Ameri- 
can, whether  a  stockholder  of  the  company  or  not,  could  secure  the 
benefits  of  the  patents  on  fair  and  equal  terms. 

It  is  submitted  that  the  organization  of  this  institution  consti- 
tutes the  most  important  step  that  has  been  taken  for  the  protec- 
tion of  the  new  industry.  Tariff  protection  has  proved  utterly 
unavailing  in  the  past.  The  German  industry  as  hitherto  organ- 
ized, and  still  more  as  now  organized,  has  had  so  much  to  gain  by 
extending  its  foreign  trade  and  by  destroying  the  industry  in  other 
countries  that  it  would  undoubtedly  give  away  its  goods  in  this 
country  for  nothing  in  order  to  recover  the  American  market.  The 
Chemical  Foundation,  however,  should  prove  a  power  sufficient  to 
discourage  in  a  most  effective  manner  any  German  attempts  in  this 
direction.  If,  as  their  newspapers  boast,  the  Germans  have  during 
the  war  worked  out  entirely  new  dyes  superior  to  their  past  pro- 
ductions, the  protection  afforded  by  it  will  be  invaluable.  It  has 
been  the  uniform  experience  of  the  industry  that  the  introduction 
of  new  classes  of  dyestuffs  follows  only  several  years  after  the 
patenting  of  the  original  inventions  on  which  their  manufacture 
depends.  Accordingly,  the  later  dyes  of  to-day  depend  largely 
upon  the  patents  of  three  or  four  years  ago.  The  patents  trans- 
ferred to  the  Chemical  Foundation  include  many  German  patents 
of  1 91 7  and  even  of  1918,  and  also  many  applications  still  pend- 

1:493 


The  CHEMICAL    FOUNDATION,    Inc. 

ing.  These  patents  undoubtedly  include  the  results  of  the  research 
upon  which  must  be  based  the  manufacture  of  any  new  dyes  which 
the  Germans  are  now  able  to  produce  and  market.  Accordingly, 
at  the  very  least,  the  institution  will  be  able  to  protect  the  Ameri- 
can industry  for  a  considerable  period,  and  this  should  be  all  it 
needs.  It  appears  to  be  the  universal  view  of  the  more  competent 
manufacturers  in  this  country  that,  given  five  years  of  freedom 
from  German  competition,  the  American  industry  can  hold  its  own. 
Probably  only  a  measure  such  as  the  embargo  which  appears  to 
have  been  imposed  by  the  British  and  French  against  all  foreign 
dye  importations  can  furnish  this  protection  to  the  degree  neces- 
sary to  insure  the  safety  of  the  American  industry;  but  short  of 
such  an  embargo,  the  Chemical  Foundation  would  seem  to  furnish 
all  the  aid  that  possibly  can  be  given. 

At  the  same  time  the  new  institution  promises  an  incalculable 
benefit  not  only  to  the  dye  and  chemical  industries  but  to  the  whole 
American  manufacturing  world.  The  opportunities  which  it  can 
ofi"er  and  the  rewards  which  it  can  hold  out  to  competent  research 
scientists  should  far  exceed  those  of  any  institution  unconnected 
with  industry,  and  it  may  well,  therefore,  form  the  nucleus  of  the 
greatest  research  organization  in  the  country. 


D03 


THE  GERMAN  MENACE 

[fly  Francis  P.  Garvan,  Alien  Property  Custodian'] 

FOR  nineteen  months  I  have  been  engaged  in  a  study  of  Ger- 
man industrial  life  and  its  manifestations  and  activities  in 
the  United  States,  and  1  come  here  to  give  you  as  briefly  as 
I  may  a  few  of  the  incontrovertible  facts  which  my  experience  has 
made  clear. 

First  and  foremost,  be  it  understood  that  this  was  an  industrial 
war,  brought  on  by  industrial  Germany  in  her  lust-mad  haste  to 
capture  the  markets  of  the  world.  Industrial  Germany  in  its  arro- 
gance and  pride  preferred  the  formidable  hazard  of  battle  to  the 
progressive  and  sure  infiltration  which  within  ten  or  twenty  years 
might  well  have  given  her  the  world  domination  she  sought  from 
complacent  and  unthinking  peoples. 

Industrial  Germany  was  in  control  of  Imperial  Germany.  In- 
dustrial Germany  sympathized  and  participated  in  the  preparation 
for  this  war.  Industrial  Germany  waged  this  war.  Industrial 
Germany  was  the  first  to  see  defeat  and  forced  the  military  peace, 
in  order  that  with  her  industrial  equipment  intact  she  might  con- 
tinue that  same  war  by  intensified  and  concentrated  economic 
measures. 

Her  ambitions  are  the  same  in  peace  and  in  war.  Her  methods 
are  the  same  in  peace  and  in  war.  Destroy  your  business  competi- 
tor by  state  aid,  cartel  combination,  dumping,  full-line  forcing, 
bribery,  theft  of  patents  or  inventions,  espionage,  and  propaganda! 
Destroy  your  military  adversary  by  tearing  up  sacred  treaties,  by 
unlicensed  and  unbridled  submarine  and  poisonous  gas  warfare, 
by  the  destruction  of  factories,  mines  and  vineyards,  by  terrorism 
and  vandalism! 

You  or  I  have  yet  to  hear  one  word  of  a  change  of  heart  or  pur- 
pose; one  word  of  regret  or  shame;  one  word  of  dispraise  for  any 
leader  in  the  past  holocaust.  On  the  other  hand,  hold  to  the  fact 
that  at  this  moment  the  four  men  best  fitted  to  conduct  a  ruthless 


The   CHEMICAL    FOUNDATION,    Inc. 

economic  war  upon  this  country,  the  four  men  who  planned,  insti- 
gated and  paid  for  all  the  black  history  of  lawlessness  under  which 
we  suffered  for  two  and  a  half  years,  Dr.  Albert,  Dr.  Dernburg, 
Captain  Boy-Ed,  and  von  BernstorfT,  are  the  helmsmen  of  the 
present  German  Government.  Dr.  Heinrich  Albert  is  now  Under- 
Secretary  of  State;  Herr  Bernhard  Dernburg  is  now  Minister  of 
Finance;  Boy-Ed  is  Director  of  the  Intelligence  Section  of  the 
Foreign  Office,  the  Espionage  and  Propaganda  Division ;  and  that 
arch-criminal,  BernstorflF,  is  over  them  all,  directing  and  leading 
the  new  Government. 

Has  the  war  ended  for  you? 

It  was  Germany's  chemical  supremacy  that  gave  her  confidence 
in  her  avaricious  dream  of  world  empire.  It  was  German's  chemi- 
cal supremacy  that  enabled  her  to  wage  four  years  of  pitiless  war- 
fare. And  it  is  Germany's  chemical  supremacy  upon  which  she 
relies  to  continue  this  war;  and  for  that  supremacy  she  pays  hom- 
age to  her  dye  industry,  and  counts  upon  that  dye  industry  to 
maintain  it. 

Since  1866  Germany  has  recognized  the  fact  that  upon  the  de- 
velopment of  the  dye  industry  rested  her  entire  development  of 
organic  chemistry,  that  upon  the  development  of  organic  chem- 
istry rested,  in  an  ever-increasing  measure,  all  the  development  of 
modern  business,  and  modern  warfare. 

And  so  she  cherished  the  industry  with  wisdom  and  prevision 
while  it  was  still  in  its  childhood,  and  by  her  patience,  by  her  per- 
sistence, by  the  willingness  of  her  people  to  sacrifice  in  unselfish 
cooperation,  she  has  gradually  transformed  the  plans  made  in  the 
year  1866  into  the  reality  of  to-day. 

And  now  she  realizes  that  her  dye  industry  constitutes  her  keen- 
est wedge  with  which  to  force  her  way  back  into  the  world  trade. 
She  calls  the  dye  industry  her  chief  "Protective  Industry,"  and  has 
laid  out  for  it  a  program  of  state  protection  and  aid  which  should 
startle  us.  She  proposes  to  use  the  alleged  necessities  of  the  world 
for  her  dyes  to  force  all  her  other  exports.  In  other  words,  she 
proposes  to  use  it  as  a  club  with  which  to  fight  her  way  back  into 
commercial  society. 

Prior  to  the  war  the  German  dye  industry  was  united  into  three 

[52] 


The   CHEMICAL    FOUNDATION,    Inc. 

cartels  with  some  independent  companies  outside.  All  are  now 
united  into  one  monster  cartel,  the  I.  G.  Company,  with  Mr.  Wein- 
berg, the  old  head  of  the  Cassella  Color  Company,  as  its  president, 
and  a  capitalization  of  hundreds  of  millions  of  dollars.  Germany 
has  taken  it  under  state  aid  and  protection;  she  has  decided  to 
establish  a  guaranty  fund  whereby  all  industries  share  the  losses 
the  cartel  may  be  compelled  to  face  through  dumping,  bribery,  or 
other  expense  incurred  in  reasserting  her  dye  monopoly  of  the 
world.  She  looks  forward  to  granting  it  trade  export  premiums, 
freight  rebates,  intensified  consular  service,  and  state  guarantees 
against  labor  troubles. 

As  a  result,  our  young  but  vigorous  industry  stands  here  to-day 
in  direct  competition,  not  only  with  the  great  cartel  I.  G.,  but  with 
that  great  cartel  sustained  and  supported  and  subsidized  by  the 
entire  strength  and  wealth  of  the  German  kingdom. 

Over  three  billion  dollars  of  annual  business  in  America,  includ- 
ing yours,  are  dependent  upon  the  dye  industry.  Is  there  any 
doubt  that  the  destruction  of  the  American  industry  means  your 
enslavement  to  that  cartel,  and  your  destruction  when  it  becomes 
the  whim  of  that  cartel? 

For  years  that  three  billion  dollars  of  annual  business  was  de- 
pendent upon  the  graciousness  of  German  ambition.  The  time 
had  not  come  when  it  seemed  to  their  self-interest  to  cripple  or 
destroy  it,  but  when  the  war  came  on,  in  an  instant  Germany  felt 
the  force  of  your  dependence  and  attempted  to  use  your  necessities 
to  influence  the  policies  of  your  Government.  There  was  a  con- 
siderable period  when  Germany  could  have  relieved  your  distress; 
but  would  not.  There  was  a  period  thereafter  when  her  branches 
here  might  have  assisted  you;  but  they  would  not. 

Listen!  April  25,  191 5,  Boy-Ed,  of  ill-smelling  fame,  writes  to 
Albert:  "Very  Honorable  Privy  Counsellor.  To-day's  World 
prints  the  enclosed  short  article  on  the  alleged  erection  of  dye 
factories  in  New  Jersey  by  Germans.  In  case  you  are  not  able  to 
take  any  steps  to  prevent  an  undertaking  of  this  kind,  I  am  re- 
questing you  to  indicate  to  whose  attention  I  could  call  the  matter. 
With  greetings,  etc."    Signed,  Boy-Ed. 

Albert  answers,  April  28,   191 5:   "Very  Honorable  Captain: 

1:533 


The   CHEMICAL    FOUNDATION,    Inc. 

With  regard  to  dyes,  I  got  into  touch  with  local  experts  in  order 
to  determine  what  truth  there  is  in  the  news.  According  to  my 
knowledge  of  things,  the  matter  is  a  fake  inasmuch  as  our  factories 
have  bound  themselves  orally  and  by  word  of  honor  to  do  nothing 
in  the  present  situation  which  might  help  the  United  States." 

Thank  God!  That  day  your  independence  began.  That  day 
our  industry  was  born.  And  supported  by  you  with  loyalty,  pa- 
tience and  sacrifice,  it  has  grown  until  to-day  $450,000,000  is  en- 
listed in  the  cause  and  we  see  the  end  forever  of  the  past  slavery 
and  we  stand  unafraid  in  the  face  of  any  threat. 

But  even  greater  than  the  importance  of  the  dye  industry  in 
commercial  life  is  its  absolute  necessity  in  modern  warfare.  I 
quote  from  Dr.  Schweitzer: 

"In  no  other  field  has  German  efficiency  proven  its  superiority 
as  in  that  of  chemistry.  While  this  was  anticipated  before  the 
present  war,  it  is  no  exaggeration  to  state  that  the  German  chemist 
has  so  far  contributed  as  much,  if  not  more,  to  the  success  of  the 
campaign  than  the  strategist,  the  army  and  the  navy,  and  that, 
therefore,  the  present  holocaust  may  be  justly  called  the  'chemists' 
war/  " 

Eighty  per  cent  of  her  explosives,  and  all  her  poisoned  gases, 
were  manufactured  by  Germany's  dye  factories. 

And  does  any  one  for  a  moment  imagine  that  you  are  going 
to  handle,  or  that  the  women  of  America  are  going  to  buy  or  wear, 
the  by-product  of  the  destruction  of  their  70,000  sons? 

A  Commission  appointed  by  the  Allied  Governments  has  just 
reported  to  their  respective  Governments:  "At  first,  chlorine  and 
phosgene  were  the  main  requirements,  but  afterwards  a  variety  of 
organic  substances  were  employed,  all  of  which  were  made  by  the 
factories  of  the  I.  G.  combination,  and  many  of  these  substances 
were  new  and  difficult  to  prepare,  and  rapid  production  was  only 
possible  owing  to  the  speed  with  which  the  peaceful  organization 
of  the  dye  factories  could  be  utilized  for  these  purposes.  When 
the  Government  wished  to  introduce  a  new  gas,  a  conference  of 
the  various  firms  was  held  at  Berlin  to  determine  how  the  manu- 
facture should  be  subdivided  in  order  to  use  the  existing  plant  to 
the  best  advantage.    For  instance,  the  initial  stages  of  the  manu- 

[54] 


The   CHEMICAL    FOUNDATION,    Inc. 

facture  of  mustard  gas  were  carried  on  at  Ludwigshafen,  and  the 
final  stage  at  Leverkusen." 

They  go  on :  "In  the  future  it  is  clear  that  every  chemical  factory 
must  be  regarded  as  a  potential  arsenal,  and  other  nations  cannot, 
therefore,  submit  to  the  domination  of  certain  sections  of  chemical 
industry,  which  Germany  exercised  before  the  war.  For  military 
security  it  is  essential  that  each  country  should  have  its  chemical 
industry  firmly  established,  otherwise  we  are  leaving  Germany  in 
possession  of  a  weapon  which  will  be  a  permanent  menace  to  the 
peace  of  the  world. 

"The  key  to  Germany's  war  production  of  explosives  was  the 
Haber  process  for  the  production  of  ammonia  from  atmospheric  ni- 
trogen. Without  such  a  process  Germany  could  not  have  made  the 
nitric  acid  required  for  her  explosive  program,  nor  obtained  fer- 
tilizers for  food  production  after  the  supply  of  Chile  saltpetre  had 
been  stopped  by  our  blockade,  and  it  is  probable  that  she  could 
not  have  continued  the  war  after  1916.  In  the  event  of  another 
war,  we  might  be  cut  off  from  supplies  of  saltpetre,  while  Germany 
would  be  independent  of  them." 

Gas  warfare,  and  its  development,  even  if  forbidden  by  the 
League  of  Nations,  cannot  safely  be  left  in  German  hands,  and 
organic  substances  will  be  employed  which  we  do  not  know  to-day. 
Any  country  without  a  well  developed  chemical  industry  is  in 
danger. 

Useless  your  armies  and  your  navies,  your  U-boats  and  your 
aeroplanes,  unless  by  means  of  a  developed  dye  industry  you  keep 
abreast  with  modern  chemical  warfare. 

But  this  industry  has  had,  and  now  has,  another  great  function 
in  Germany's  machine.  It  was,  and  is,  the  basis  of  her  espionage 
and  propaganda  system. 

True  it  is  that  we  had  in  this  country  the  Orenstein  Arthur- 
Koppel  Company,  a  German  concern  owning  a  large  plant  at  Kop- 
pel,  near  Pittsburgh.  The  chief  business  of  that  company  was  the 
manufacture  and  installation  of  what  is  known  as  "inside  trans- 
portation," that  is,  narrow  gauge  railways,  dump  cars,  traveling 
cranes,  and  machinery  of  a  similar  sort  used  in  large  industrial 
plants.    It  was  the  American  branch  of  a  great  German  house  with 


The   CHEMICAL    FOUNDATION,    Inc. 

connections  in  all  the  great  countries  of  the  world.  For  twenty 
years  it  has  put  in  bids  based  upon  the  plans  and  specifications  of 
every  big  industrial  plant  built  in  this  country;  and  for  that  same 
twenty  years,  blueprints  of  these  specifications  and  floor  plans  and 
elevations  have  gone  on  file  in  the  Government  office  in  Berlin. 

True  it  is  that  in  this  country  we  had  eighteen  branches  of  Ger- 
man insurance  companies,  largely  engaged  in  the  reinsurance  busi- 
ness; and  that  these  companies  collected  for  their  own  use  detailed 
plans  of  all  property  insured  by  them,  with  especial  reference  to 
the  hazard  of  the  insured  buildings  from  fire,  explosion  or  other 
causes;  and  duplicates  of  these  plans  and  drawings  also  found 
their  resting  place  in  the  Berlin  office.  And  we  wondered  at  the 
accuracy  of  our  factory  fires  and  explosions ! 

True  it  is  that  Germany,  through  the  Bosch  Magneto  Company, 
the  Eisemann  Magneto  Company  and  the  Boonton  Rubber  Com- 
pany, had  a  practical  monopoly  of  the  ignition  systems  in  America, 
and  through  this  combination  the  files  of  the  central  office  in  Berlin 
were  kept  up  to  date  with  all  plans  for  improvements  in  military 
trucks,  gasoline  boats  and  aeroplanes. 

Let  me  read  you  Manager  Otto  Heins'  report  to  Dr.  Albert  of 
the  activities  of  the  Bosch  Magneto  Company  in  this  your  country, 
at  that  time  neutral : 

"Honored  Mr.  Albert:  In  connection  with  the  obstruction  policy 
upon  which  we  agreed  at  the  beginning  of  the  war  in  matters  con- 
cerning deliveries  of  our  products,  especially  the  special  magneto 
apparatus,  I  should  like  in  the  following  to  make  several  state- 
ments from  which  one  will  clearly  see  that  the  accomplished  ob- 
struction policy  has  in  every  way  been  successful.  In  short,  we  had 
great  difficulty  at  the  beginning  of  the  war  in  withholding  the 
much-needed  special  aeroplane  apparatuses  from  the  Allies,  and  in* 
preventing  the  Allies,  especially  the  English,  from  immediately 
attempting  to  manufacture  them  for  themselves.  Special  appa- 
ratuses are  involved  in  flying  machines,  airship  and  speed  boats. 
These  apparatuses  are  very  different  from  the  normal  apparatus 
used  on  automobiles  and  motorcycles.  We  have  freely  supplied 
them  with  ordinary  apparatuses;  but,  in  accordance  with  our 
agreement,  we  have  entered  into  apparent  negotiations  with  the 

1:56: 


r/j^  CHEMICAL    FOUNDATION,    Inc. 

representatives  of  the  Allies,  creating  in  their  minds  the  impression 
that  they  would  receive  also  the  special  apparatuses  at  the  present 
time.  These  negotiations  began  immediately  after  the  first  declara- 
tion of  war,  and  it  was  possible,  on  account  of  their  technical  char- 
acter, to  extend  them  many  months  into  the  war.  Our  policy  lulled 
them  into  the  certainty  that  they  would  receive  the  special  appa- 
ratus and  only  now,  November  30,  fifteen  months  after  war  began, 
have  they  realized  our  duplicity." 

He  goes  on  to  state  that  this  policy  has  been  carried  out  despite 
the  fact  that  these  contracts  were  in  many  instances  subcontracts 
with  American  firms;  and  he  gloatingly  continues  that  as  a  result 
of  his  activities  in  this  country  England,  in  October,  19.15,  found 
herself  unable  to  defend  London  against  their  air  raids,  and  states 
that  France  was  in  a  much  better  position  to  protect  herself  against 
air  raids  because  of  her  confiscation  of  the  Bosch  factories  in  Paris 
at  the  beginning  of  the  war.  I  wonder  how  many  women  and 
children  were  killed! 

True  it  is  that  the  Hamburg- American  Line  and  the  Nord 
Deutsche  Lloyd  kept  faithful  tab  for  Berlin  on  a  thousand  details 
of  our  business  life  which  came  under  their  observation;  that  not  a 
ship  left  our  harbors,  not  a  cargo  was  loaded  or  unloaded,  but  that 
some  member  of  its  organization  watched  and  reported  every 
detail  to  be  sent  by  code  to  the  German  Government. 

But  greater  than  all,  and  forming  the  foundation  of  her  entire 
espionage  and  propaganda  system,  stood  the  dye  industry.  Her 
trained  observers  enjoyed  full  access  to  the  businesses  they  sup- 
plied, and  regularly  and  faithfully  reported  each  and  every  detail 
of  the  three  billion  dollars  of  annual  business  dependent  upon  the 
dye  industry  in  this  country.  As  long  as  you  were  supplied  by  the 
"Big  Six,"  your  business  had  no  secret  unknown  to  Berlin.  In 
Berlin  you  will  find  a  card  index  system  which  recites  every  fact 
connected  with  each  and  every  one  of  your  concerns  that  can  be  of 
any  possible  value  to  your  rivals  over  there. 

The  head  of  that  system  in  this  country  for  years  before  the  war 
was  Dr.  Hugo  Schweitzer,  president  of  the  Bayer  Company.  Right 
here  you  will  be  glad  to  know  that  the  Bayer  Company  is  now  100 
per  cent  American,  having  been  bought  by  loyal  Americans.    He 


The  CHEMICAL    FOUNDATION,    Inc. 

was  given  his  Secret  Service  number  by  the  Imperial  Minister  of 
War,  963,192,637.  He  came  to  this  country,  became  a  citizen  on 
the  instruction  of  the  German  Government,  eventually  was  made 
the  head  of  the  Bayer  Company,  and  led  the  espionage  and  propa- 
gandist movements  here  down  to  the  day  of  his  sudden  death  in 
November,  191 7.  His  regular  reports  to  Germany  are  the  story  of 
your  prewar  slavery  and  the  story  of  the  activity  of  each  and 
every  representative  connected  with  the  old  "Big  Six"  to  perpetu- 
ate that  slavery.  When  Albert  came  here,  to  assume  the  leadership 
of  that  system,  it  is  to  Schweitzer  he  first  turns.  And  then  we  find 
Schweitzer  bringing  to  Albert's  office  from  day  to  day  those  other 
smiling  gentlemen  who  sold  you  the  "peerless  dyes"  in  the  past. 
From  that  moment  Germany's  trade  outposts  in  this  country  were 
turned  into  ministers  of  lawlessness  and  destruction. 

A  word  or  two  of  his  activities.  Schweitzer  was  the  inventor  of 
the  idea  of  the  purchase  of  the  New  York  Evening  Mail. 
Schweitzer  was  the  inventor  of  the  idea  of  the  German  Publication 
Society,  formed  to  publish,  for  our  delectation,  the  literature  of 
German  Kultur.  Schweitzer,  with  Henry  Weissmann,  president 
of  the  German-American  Alliance,  we  see  forming  the  Printers  and 
Publishers'  Association,  another  attempt  to  create  an  English- 
language  newspaper  to  present  Germany's  side  of  the  war.  Over 
thirty  trained  chemists,  his  lieutenants,  are  now  interned. 

We  find  Albert,  about  to  go  home,  in  January,  19 17,  turning  over 
to  Schweitzer  $1,178,882.08;  and  again,  on  February  2,  $300,000, 
all  to  be  spent  in  espionage  and  propaganda.  We  find  Schweitzer 
using  the  chemical  branches  of  the  "Big  Six"  in  this  country  to 
form  the  Chemical  Exchange,  by  which  all  available  phenol  supply 
in  America  was  turned  away  from  the  manufacture  of  picric  acid 
for  explosives  for  the  Allies,  with  a  profit,  out  of  America's  pocket, 
to  Germany  of  $1,650,000. 

Listen  to  Albert's  praise: 

"The  breadth  of  high-mindedness  with  which  you  at  that  time 
immediately  entered  into  the  plan  has  borne  fruit  as  follows :  One 
and  a  half  million  pounds  of  carbolic  acid  have  been  kept  from  the 
Allies.  Out  of  this  one  and  a  half  million  pounds  of  carbolic  acid 
four  and  one-half  million  pounds  of  picric  acid  can  be  produced. 


The  CHEMICAL    FOUNDATION,    Inc. 

This  tremendous  quantity  of  explosive  stuifs  has  been  withheld 
from  the  Allies  by  your  contract.  In  order  to  give  one  an  idea  of 
this  enormous  quantity  the  following  figures  are  of  interest : 

"4,500,000  pounds  equals  2,250  tons  of  explosives.  A  railroad 
freight  car  is  loaded  with  20  tons  of  explosives.  The  2,250  tons 
would,  therefore,  fill  1 12  railway  cars.  A  freight  train  with  explo- 
sives consists  chiefly  of  40  freight  cars,  so  that  the  4,500,000 
pounds  of  explosives  would  fill  3  railroad  trains  with  40  cars  each. 

"Now  one  should  picture  to  himself  what  a  military  coup  would 
be  accomplished  by  an  army  leader  if  he  should  succeed  in  destroy- 
ing three  railroad  trains  of  forty  cars,  containing  four  and  a  half 
million  pounds  of  explosives. 

"Of  still  greater  and  more  beneficial  effect  is  the  support  which 
you  have  afforded  to  the  purchase  of  bromine.  We  have  a  well- 
founded  hope  that,  with  the  exclusion  of  perhaps  small  quantities, 
we  shall  be  in  a  position  to  buy  up  the  total  production  of  the 
country.  Bromine,  together  with  chloral,  is  used  in  making  nitric 
gases,  which  are  of  such  great  importance  in  trench  warfare. 
Without  bromine  these  nitric  gases  are  of  slight  effect;  in  connec- 
tion with  bromine,  they  are  of  terrible  effect.  Bromine  is  produced 
only  in  the  United  States  and  Germany.  While,  therefore,  the  ma- 
terial is  on  hand  in  satisfactory  quantities  for  the  Germans,  the 
Allies  are  entirely  dependent  upon  importation  from  America." 

Gentlemen,  did  you  intend  by  your  support  of  the  German  dye 
industry  to  leave  the  Allies  defenceless  against  the  poison  gas  made 
by  that  German  dye  industry? 

But  that  is  not  the  worst.  At  Bogota,  New  Jersey,  in  the  New 
Jerse>  Agriculture  Chemical  Company,  Dr.  Schweitzer  employed 
Dr.  Walter  Scheele,  who  was  the  inventor,  in  that  little  town  of 
New  Jersey,  in  1 9 1 3,  of  mustard  gas,  the  formula  of  which  he  trans- 
mitted through  Captain  von  Papen  to  Germany  as  soon  as  the  war 
broke  out.  This  is  the  mustard  gas  which  laid  low  your  brothers 
on  the  plains  of  France.  And  for  Scheele  Dr.  Schweitzer  laid  out 
the  plans  for  the  preparation  of  the  bombs  which  destroyed  your 
ships  in  your  harbors. 

Untold  millions  were  spent  by  this  man  in  propaganda  and 
espionage  in  the  United  States.     In  the  two  years  before  we  en- 

D93 


The  CHEMICAL   FOUNDATION,    Inc. 

tered  the  war,  the  Bayer  Company  drew  $2,000,000  from  the  profits 
of  its  Orient  and  South  American  houses,  which  money  was  spent 
here,  for  what  purposes  we  can  well  imagine.  Practically  all  the 
dye  salesmen  you  saw  were  only  nominally  in  the  employ  of  the 
branches  here;  all  had  secret  and  personal  contracts  with  the  home 
office. 

All  that  I  have  said  of  Schweitzer  is  typical  of  practically  all 
representatives  of  German  dye  houses  in  this  country.  Wherever 
we  have  found  espionage  or  propaganda  activity,  there  you  will 
find  those  names  so  familiar  to  you  in  the  days  of  your  slavery. 
You  will  find  the  same  gang  returning,  decrying  our  dyes,  selling 
apparently  Swiss  or  unmarked  dyes,  telling  you  tales  of  German 
distress,  serving  as  ever  their  Fatherland.    Be  on  your  guard. 

Coincident  with  the  development  of  Germany's  dye  industry 
came  the  general  development  of  her  chemical  strength.  It  offered 
great  incentives  to  young  men.  It  developed  a  large  body  of 
trained  scientists.  It  encouraged  and  fostered  the  spirit  of  research 
in  all  lines,  and  added  to  the  effectiveness  of  practically  every 
industry  in  the  empire.  Nowhere  is  this  more  striking  than  in  the 
supremacy  Germany  was  attaining  in  chemical  medicine. 

One  other  thought  I  want  you  to  have  in  mind  is  this:  For  four 
years  now  the  chemical  science  developed  by  the  dye  industry  of 
Germany  has  focussed  its  mind  largely  upon  substitutes  for  the 
raw  material  she  has  hitherto  received  from  the  outside  world. 
The  leader  of  her  chemical  industry  in  this  country.  Dr.  Hugo 
Schweitzer,  of  whom  I  will  have  more  to  say  later  on,  wrote  to 
his  Government : 

"All  these  endeavors  to  substitute  cotton  may  appear  ridiculous 
to  us  who  have  been  brought  up  with  the  idea  that  Cotton  is  King 
and  that  America  has  been  designed  by  fate  to  supply  this  fiber  to 
the  civilized  world.  The  farmers  who  cultivated  the  madder  root, 
and  the  planters  who  raised  indigo,  were  also  inclined  to  jest  when 
they  were  apprised  of  the  fact  that  German  chemists  had  succeeded 
in  reproducing  in  the  laboratories  the  dyes  which  their  crops  fur- 
nished; but  when  the  manufactured  materials  drove  the  natural 
products  from  the  market,  and  left  the  farmers  and  planters  with- 
out a  job,  hilarity  ceased.    History  may  repeat  itself  and  willow- 


The  CHEMICAL    FOUNDATION,    Inc. 

bark  and  nettle,  or  some  other  substitute,  raised  on  German  soil, 
may,  in  the  near  future,  depose  King  Cotton.  The  German  chemist 
has  a  duty  to  perform,  and  with  his  perseverance  and  application 
he  does  not  shrink  from  any  problem,  however  difficult  it  may 
appear  to  outsiders." 

Gradually  Germany  was  obtaining  control  of  the  pharmaceuti- 
cal industry  of  the  world,  and  gradually  it  was  dawning  upon  her 
that  this  development  too  might  put  in  her  hands  an  even  more 
powerful  weapon  than  explosives  or  poisonous  gas  in  her  con- 
scienceless conquest  of  the  world.  Most  of  the  great  discoveries 
in  chemical  medicine  came  directly  from  the  dye  laboratories. 
Are  you  content  that  the  development  of  chemical  medicine  shall 
remain  the  exclusive  possession  of  the  German  nation  as  we  now 
know  it? 

Briefly  then  I  have  tried  to  give  you  a  picture  of  the  situation  of 
this  country  in  its  relation  to  the  dye  industry,  as  our  daily  experi- 
ence of  the  past  eighteen  months  unrolled  it  before  us.  Do  you 
wonder  that  A.  Mitchell  Palmer  and  all  those  who  fought  under 
him  were  shocked  beyond  measure,  and  could  not  rest  until  Con- 
gress had  amended  the  Act  and  had  given  us  the  power  under 
which  we  have  rooted  out  each  and  every  branch  of  that  system 
and  sold  it  into  the  hands  of  patriotic  Americans? 

But  that  was  not  enough.  Germany  had  misused  our  patent 
system,  just  as  she  had  misused  and  violated  our  Sherman  Law, 
our  antidumping  laws,  our  antibribery  acts,  our  business  code,  and 
our  common  code  of  honesty.  She  had  taken  out  patents  for  all 
her  developments,  covering,  in  many  instances,  not  only  the  pro- 
cesses, to  prevent  manufacture  here,  but  also  the  product,  to  pre- 
vent our  taking  advantage  of  any  possible  development  in  the  dye 
industry  of  other  countries. 

4,500  of  these  patents  which  applied  to  chemistry  Mr.  Palmer 
has  sold  for  the  benefit  of  American  industries  to  a  quasi-trustee 
corporation,  called  the  Chemical  Foundation.  This  company  is 
capitalized  for  $500,000,  $400,000  being  six  per  cent  preferred 
stock  and  $100,000  common  stock,  also  limited  to  dividends  of 
six  per  cent. 

The  stock  has  been  all  underwritten  by  members  of  the  Dye 


The  CHEMICAL   FOUNDATION,    Inc. 

Institute,  each  and  all  taking  their  share,  and  is  now  in  process  of 
distribution  through  the  dye  producers  and,  eventually,  through 
the  consumers.  It  is  the  intention  that  ultimately  no  one  will  own 
more  than  a  thousand  dollars'  worth  of  stock,  eight  hundred  pre- 
ferred and  two  hundred  common. 

All  license  fees  accruing  to  the  Foundation  will  be  used  first  to 
pay  back  the  preferred  stock.  All  surplus  then  above  the  six  per 
cent  actually  invested  will  be  expended  for  the  development  of 
research  and  the  encouragement  of  the  chemical  industry  of 
America. 

Its  executives  serve  with  enthusiasm  and  without  pay.  All  its 
stock  is  trusteed  for  a  period  of  seventeen  years.  Its  management 
and  its  policies  are  controlled  by  a  Board  of  Trustees,  consisting  of 
Otto  Bannard,  President  of  the  New  York  Trust  Company,  Chair- 
man; Cleveland  H.  Dodge;  George  L.  Ingraham,  late  Presiding 
Justice  of  the  Appellate  Division  of  the  New  York  Supreme  Court; 
Ralph  Stone,  President  of  the  Detroit  Trust  Company;  and  Ben- 
jamin Griswold,  of  Brown  &  Son,  Baltimore.  These  gentlemen 
have  been  serving  as  the  Advisory  Sales  Committee  of  the  Alien 
Property  Custodian  for  over  a  year.  They  represent  the  highest 
standard  of  American  patriotism  and  disinterestedness.  Long 
lives  of  manifested  ability,  long  lives  of  unselfish  service  to  their 
country,  guarantee  the  character  of  the  Chemical  Foundation. 

Its  counsel  is  Joseph  H.  Choate,  who,  as  a  dollar-a-year  man,  has 
given  eighteen  months  of  tireless  and  efficient  service  in  the  exclu- 
sive study  of  the  chemical  situation.  Its  patent  counsel  is  the 
fighting  Ramsay  Hoguet. 

This  Foundation  proposes  to  license  to  any  competent,  equipped 
and  patriotic  American,  individual,  firm  or  corporation,  such  of 
these  patents  as,  with  the  help  and  encouragement  of  the  Founda- 
tion, may  be  utilized.  This  Foundation  proposes  to  begin  to  fight 
at  the  customs  gate  against  any  violation  of  the  patents  now 
owned  by  it,  whether  they  appear  as  denationalized  or  camou- 
flaged products  seeking  to  enter  through  neutral  sources.  It  pro- 
poses to  establish  an  Intelligence  Department  which  will  coordi- 
nate, preserve  and  utilize  all  the  chemical  information  gathered  by 
every  department  of  the  Government  during  the  war,  and  make 


The  CHEMICAL    FOUNDATION,    Inc. 

that  information  available  to  the  American  public  that  they  may 
know  the  exact  truth  as  to  the  past,  and  may  be  kept  apprised  of 
all  German  activity,  either  through  its  own  agents  or  its  American 
connections,  during  every  stage  in  the  coming  struggle. 

It  proposes  to  match  with  watchfulness  and  pitiless  publicity 
all  future  attempts  at  espionage  or  propaganda  in  our  land."  It 
proposes  to  expose  all  unfounded  criticism  directed  against  our 
productions,  and,  on  the  other  hand,  to  do  what  it  can  to  prevent 
producers  or  dealers  here  casting  reflection  upon  our  industry  by 
the  marketing  of  inferior  or  dishonestly  described  products. 

It  proposes  to  encourage  and  foster  chemical  research  by  co- 
operation with  the  forces  already  at  work;  by  offering  some  hope 
of  protection  and  reward  to  the  loyal  research  men  in  the  United 
States  Government  Service,  who  now  by  Department  rule  have  to 
dedicate  their  inventions  to  the  public,  a  course  which  results  only 
in  Germany  transferring  these  inventions  to  her  own  laboratory 
system  for  development  or  exploitation. 

It  proposes  to  bring  about  a  closer  union  of  the  university  and 
the  factory.  It  has  taken  over  all  German  copyrights,  and  will 
thus  free  much  scientific  literature  from  the  shackles  of  the  German 
language.  It  proposes  to  place  all  possible  information  on  our 
situation  before  Congress,  and  ask  the  passage  of  a  law  establish- 
ing a  license  system  governing  all  chemical  importations  for  a 
period  of  ten  years.  It  is  intended  that  this  license  system  shall 
act  at  one  and  the  same  time  as  a  guarantee  to  you  and  all  other 
dependent  industries  for  proper  importations  to  enable  you  to  meet 
the  competition  of  other  lands,  and  to  protect  and  guard  our  grow- 
ing chemical  independence.  In  this  we  ask  no  more  than  England, 
France,  Italy  and  Japan  have  already  decided  to  grant  on  behalf 
of  their  own  independence.  This  request  we  base  upon  the  follow- 
ing grounds : 

1.  Fairness  to  the  $450,000,000  invested  in  the  chemical  busi- 
ness by  loyal  Americans  in  the  hour  of  our  need. 

2.  Independence  and  freedom  of  the  textile,  leather,  paper, 
paint  and  varnish,  pharmaceutical  three-billion  dollar  essential 
American  business. 

3.  The  necessity  of  our  national  defence. 


The   CHEiMICAL    FOUNDATION,    Inc. 

4.  The  destruction  and  prevention  of  the  German  system  of 
propaganda  and  espionage  in  our  land. 

5.  The  advancement  of  pure  science  and  research. 

6.  The  advancement  of  medical  science. 

The  granting  of  this  license  system  is  not  a  question  of  conflict- 
ing economic  schools.  It  is  the  question  of  our  national  indepen- 
dence, safety  and  education. 

Once  we  are  assured  time  in  which  to  work  out  our  salvation, 
we  hope  to  turn  to  our  dearest  objective.  Already  we  have  started 
to  make  a  survey  of  our  laboratory  equipment.  Governmental, 
university  and  factory.  Already  company  after  company  have 
passed  resolutions  through  their  Boards  of  Directors,  placing  at 
the  disposal  of  our  Trustees,  under  such  terms  and  conditions  as 
those  Trustees  may  dictate,  their  entire  research  capacity.  Gov- 
ernment laboratories  and  university  laboratories  have  also  been 
assured  us.    Gentlemen,  we  know  that  offer  will  be  unanimous. 

We  will  soon  be  able  to  go  to  the  medical  profession  of  America 
and  offer  to  them  the  entire  capacity  of  the  country  for  experiment 
and  research  for  the  betterment  of  mankind.  One  medical  chemist 
in  one  dye  factory  in  Germany  discovered  the  cure  for  syphilis,  the 
deadliest  enemy  of  mankind.  The  same  medical  chemist,  in  the 
same  dye  factory,  discovered  the  cure  for  the  sleeping  sickness  of 
Africa  which  made  a  continent  habitable.  What  can  we  not  hope 
for  when  the  American  medical  profession  is  given  unbounded 
scope  and  opportunity? 

We  are  assured  that  somewhere  within  that  realm  lies  the  hope 
of  the  cure  for  consumption,  cancer,  and  many  of  the  seizures 
which  rob  us  of  our  little  ones.  Can  it  be  that  herein  lies  the 
opportunity  of  converting  the  forces  which  up  to  now  have  been 
directed  only  toward  desolation  and  destruction  into  the  channels 
of  alleviation  and  helpfulness  to  humanity  ?  Can  it  be  that  through 
this  medium  idealist  America  may  snatch  the  torch  of  misapplied 
Science  from  the  barbarian,  and  place  it  in  the  hands  of  an  en- 
lightened civilization? 

Gentlemen,  Drs.  Albert  and  Bernstorff  reported  to  their  Govern- 
ment that  America  could  never  establish  the  dye  and  pharma- 
ceutical industry  in  this  country,  as  we  lacked  the  moral  power  for 

[64] 


The  CHEMICAL    FOUNDATION,    Inc. 

the  creation  of  such  an  industry;  that  here  each  party  pursued  its 
own  selfish  interests,  but  nobody  kept  the  whole  in  mind;  that  this 
problem  could  only  be  solved  through  regard  for  all  points  of 
view,  and  that  the  conflicting  selfishnesses  of  this  country  rendered 
that  solution  impossible. 

The  Chemical  Foundation  answers  this  statement  with  a  chal- 
lenge, and  if  it  can  only  become  the  coordinating  forum  for  Ameri- 
can patriotism,  American  sacrifice,  and  American  ability,  it  awaits 
the  issue  with  serenity. 

Gentlemen,  we  are  the  boys  who  stayed  at  home.  True,  the 
reasons  seemed  sound  and  sufficient  yesterday.  But  to-day  they 
seem  only  excuses,  ever  decreasingly  satisfying.  It  is  not  enough 
that  with  envious  tears  we  cheer  their  homecoming. 

Would  they  know  our  admiration,  they  must  sit  by  our  fireside 
and  listen  to  us  teach  our  children  the  character-building  tales  of 
their  sacrifice.  Would  they  know  our  love,  they  must  lean  over 
the  cribs  of  those  little  ones  and  listen  to  the  prayers  of  gratitude 
those  little  lips  are  lisping  in  their  behalf.  Would  they  know  the 
depth  of  the  realization  of  our  obligations,  and  the  strength  of  our 
resolve  that  they  shall  not  have  suffered  and  died  in  vain,  we  call 
upon  their  spirits  to  watch  us  in  this  fight.  Peace,  peace,  and  there 
is  no  peace ! 


n653 


PROSPECTUS  OF 

THE  CHEMICAL  FOUNDATION,  Inc. 

The  Chemical  Foundation  is  a  corporation  organized  at  the  suggestion 
of  the  Alien  Property  Custodian,  by  members  of  the  American  Dyes 
Institute,  the  American  Manufacturing  Chemists  Association,  and  other 
gentlemen  engaged  in  various  branches  of  the  chemical  industries,  to  buy 
from  the  Alien  Property  Custodian  and  hold  for  the  chemical  industries 
and  for  the  country  at  large,  the  German-owned  United  States  chemical 
and  allied  patents  taken  over  by  the  Alien  Property  Custodian  under  the 
amendment  of  November  4,  19 18,  of  the  "Trading  with  the  Enemy  Act." 

The  Company  is  a  Delaware  corporation,  capitalized  at  1500,000.00, 
of  which  1400,000.00  is  preferred  stock,  and  $100,000.00  common  stock. 
Each  of  these  stocks  is  limited  so  that  it  can  receive  no  more  than  6% 
dividends.  The  preferred  has  a  preference  as  to  both  principal  and  in- 
come, but  has  not  voting  power  except  upon  the  question  of  amendment 
of  the  charter.  The  common  stock  has  full  voting  power.  None  of  the 
stock  of  either  class  can  be  transferred  except  by  consent  of  the  Board 
of  Directors.  The  charter  provides  that  the  preferred  stock  shall  be  sub- 
ject to  redemption  as  a  whole  at  par  on  January  i,  192 1,  or  on  any  first 
of  January  thereafter,  as  the  directors  may  determine,  and  that  it  shall 
be  so  redeemed  whenever  the  accumulated  surplus  amounts  to  100%  of 
the  total  issued  and  outstanding  stock  of  all  classes.  The  common  stock 
is  to  be  issued  under  an  obligation  to  deposit  it  in  a  voting  trust  which 
is  to  continue  until  January  i,  1936. 

The  trustees,  in  whom,  under  the  voting  trust  agreement,  the  control 
of  the  Foundation  will  be  lodged,  are  the  following  gentlemen,  who  have 
been  serving  for  many  months  as  the  Advisory  Committee  which  has 
passed  upon  all  sales  made  by  the  Alien  Property  Custodian : 

Otto  T.  Bannard,  Esquire.  (Chairman,  The  New  York  Trust  Com- 
pany, N.  Y.) 

Hon.  George  L.  Ingraham.  (Late  presiding  Justice,  Appellate  Divi- 
sion, First  Department,  New  York  Supreme  Court.) 

Cleveland  H.  Dodge,  Esquire. 

B.  Howell  Griswold,  Jr.,  Esquire.  (Of  Alexander  Brown  &  Sons, 
Baltimore.) 

Ralph  Stone,  Esquire.  (President,  Detroit  Trust  Company,  Detroit, 
Michigan.) 


The  CHEMICAL   FOUNDATION,    Inc. 

The  Trust  Agreement  gives  those  trustees  the  power  to  fill  vacancies 
in  their  board,  so  that  during  the  continuance  of  the  trust  they  will  be  a 
self-perpetuating  body.  They  elect  the  directors  of  the  Company,  whose 
resignations  are  always  in  their  hands. 

The  officers  and  directors  of  the  Foundation  are  as  follows : 
President,  Mr.  Francis  P.  Garvan.    (The  Alien  Property  Custodian.) 
Vice-President,  Col,  Douglas  I.  McKay.    (Late  Colonel,  General  Staff, 
Vice-President  of  J.  G.  White  &  Co.,  and  Deputy  and  Police  Commis- 
sioner of  the  City  of  New  York  under  Mayors  Gaynor,   Kline  and 
Mitchel.) 

Treasurer  and  Secretary,  Mr.  George  J.  Corbett.  (Assistant  Secre- 
tary, Central  Union  Trust  Company.) 

These  gentlemen  are  for  the  present  serving  without  salary.  For  its 
patent  counsel  the  Foundation  has  retained  Mr.  Ramsay  Hoguet,  of  the 
New  York  firm  of  Emery,  Varney,  Blair  &  Hoguet,  to  whom,  as  patent 
counsel  for  the  Alien  Property  Custodian,  has  been  due  the  successful 
accomplishment  of  the  enormous  task  of  finding  and  transferring  the 
German  patents.  The  General  Counsel  of  the  Company  is  to  be  Mr. 
Joseph  H.  Choate,  Jr.,  who  for  the  past  year  has  been  entirely  occupied 
in  the  chemical  part  of  the  work  of  the  Alien  Property  Custodian's 
Bureau  of  Investigation.  Substantially  the  whole  of  the  special  knowl- 
edge, in  this  field,  acquired  by  the  Alien  Property  Custodian  and  his 
staff,  is  thus  at  the  disposal  of  the  Foundation.  It  is  believed  that  all  of 
the  trustees,  officers  and  counsel  of  the  Foundation  are  completely  disso- 
ciated from  the  dye-producing  and  dye-consuming  industries. 

The  members  of  the  American  Dyes  Institute  and  the  Manufacturing 
Chemists'  Association  have  placed  themselves  on  record  as  willing  to 
take  the  entire  capital  stock  of  the  Foundation,  and  have  provided  in 
advance  so  much  of  the  capital  as  was  required  for  the  purchase 
of  the  patents.  In  order  to  render  it  certain,  however,  that  the  control 
of  the  Company  can  never  be  vested,  even  at  the  termination  of  the 
voting  trust,  in  any  small  group  of  interested  parties,  the  Company 
is  now  endeavoring,  under  the  supervision  of  the  Alien  Property 
Custodian,  to  distribute  its  stock  as  widely  as  possible  among  the 
chemical  and  allied  industries.  In  any  event  no  subscriber  will  be 
allowed  to  hold  more  than  two,  and  possibly  not  more  than  one,  share 
of  the  common  stock,  which  has  the  voting  power.  It  is  hoped  that 
when  this  distribution  is  complete,  no  single  subscriber  will  retain  more 
than  $1,000.00  of  the  preferred  and  common  stock.    If  this  can  be  real- 


The  CHEMICAL    FOUNDATION,    Inc. 

ized,  the  Foundation  will  remain,  even  after  the  dissolution  of  the  voting 
trust,  the  impartial  representative  of  all  the  industries  affected.  After 
the  success  of  the  Company  shall  have  been  demonstrated  in  actual  oper- 
ation, it  is  hoped  that  the  consuming  industries  may  also  be  brought  in. 

To  the  Foundation  as  thus  organized,  the  Alien  Property  Custodian 
has  sold  for  the  sum  of  1250,000.00  substantially  all  of  the  German  dye 
and  chemical  patents,  seized  by  him,  except  those  which  were  included  in 
the  sale  of  the  Bayer  Co.,  Inc.,  which  took  place  before  the  organization 
of  the  Foundation.  The  patents  cover  a  very  wide  field,  the  classification 
including  metallurgy,  fertilizers,  fixation  of  nitrogen,  hydrogenation  of 
oils,  etc.,  and  number  approximately  forty-five  hundred.  The  transfer 
of  these  patents  has  been  completed.  They  will  be  used  to  encourage 
manufacture  in  this  country  and  discourage  importation  from  Germany. 
The  Foundation  will  issue  non-exclusive  licenses  under  them,  on  reason- 
able and  equal  terms,  to  manufacturers  whose  Americanism  and  com- 
petence are  unquestioned.  It  will  also  prosecute  with  all  possible  vigor, 
suits  against  all  persons  who  attempt  to  import  any  infringing  product. 
Since  many  of  the  patents  are  product  patents,  the  Foundation  should  be 
able  to  exclude  infringing  goods  from  any  source  whatever,  and  should 
thus  be  able  to  give  partial  protection  to  a  part,  at  least,  of  the  new 
American  dye  industry. 

In  addition  to  the  patents,  the  enemy  trademarks  taken  over  by  the 
Alien  Property  Custodian  have  likewise  been  sold  to  the  Foundation. 
A  plan  is  being  formulated  under  which  it  is  hoped  that  the  Foundation 
will  be  able  to  license  American  manufacturers  to  use  these  trademarks. 
The  intention  is  to  issue  such  licenses  only  when  the  goods  to  which  the 
mark  is  to  be  attached,  are  found,  on  examination  by  the  Foundation 
itself,  to  be  equal  or  superior  to  those  of  the  original  owner.  Such  trade- 
marks would  then  represent  to  the  public  a  guarantee  of  quality  fur- 
nished by  an  impartial  body,  and  would  thus  give  American  manufac- 
turers an  important  advantage  over  foreign  competitors. 

The  Foundation  has  also  purchased  from  the  Custodian  the  German 
copyrights  covering  some  of  the  indispensable  literature  of  science.  By 
this  means  it  should  be  able  to  render  vastly  more  accessible  than  at 
present  many  of  the  necessary  scientific  publications.  The  Foundation 
also  has  power,  under  its  charter,  to  purchase  new  patents,  and  it  is 
hoped  that  this  may  become  an  important  field  of  its  activities.  It  seems 
clear  that  an  immense  stimulus  will  be  offered  to  chemical  invention  by 
the  provision  of  such  a  disinterested  and  impartial  possible  purchaser; 
at  the  same  time,  such  transactions  would  be  valuable  to  the  public  at 


The  CHEMICAL    FOUNDATION,    Inc. 

large,  as  all  inventions  thus  purchased  would  be  available  for  imme- 
diate use  by  any  suitable  manufacturer,  and  could  not  be  suppressed. 

The  chief  usefulness  of  the  Foundation,  however,  is  expected  to  be  as 
a  centre  of  research.  Its  charter  provides  that  after  the  redemption  of 
the  preferred  stock,  the  free  net  earnings  of  the  Corporation  shall  be 
"used  and  devoted  to  the  development  and  advancement  of  chemistry 
and  allied  sciences  in  the  useful  arts  and  manufactures  in  the  United 
States."  If  the  patents  turn  out  to  be  as  valuable  as  is  hoped,  this  pro- 
vision should  render  a  considerable  income  available  for  research  pur- 
poses, and  for  this  work  the  Foundation  is  in  a  position  of  unique  advan- 
tage. It  forms  a  link  of  a  type  heretofore  unknown  between  industrial 
and  academic  research.  It  is  in  a  position  to  bring  about  in  this  country 
cooperation  between  the  laboratories  of  the  university  and  those  of  the 
dye  works  as  close  as  that  which  has  accomplished  so  much  in  Germany. 
Informal  offers  have  already  been  received  from  important  laboratories, 
placing  their  facilities  at  the  disposal  of  the  Foundation,  and  resolutions 
looking  to  the  same  end  are  already  pending  before  the  governing  bodies 
of  various  large  companies  and  institutions.  As  a  preliminary  step  in 
this  direction,  the  Foundation  intends  to  take  a  laboratory  census  of  the 
country,  a  thing  which  it  is  believed  has  never  been  attempted,  and 
hopes  thus  to  create  a  Bureau  of  Information  where  any  scientist,  at  the 
start  of  an  important  research,  may  be  able  to  ascertain  where  the  facil- 
ities which  he  needs  are  obtainable,  and  what  institution  has  already 
made  progress  along  similar  lines.  This  Bureau  should  also  be  able  to 
aid  in  bringing  together  those  who  wish  to  undertake  and  those  who  are 
interested  in  such  researches.  These  activities  will  furnish  valuable  aid 
in  what  is  perhaps  the  most  important  work  now  before  the  country,  the 
advancement  of  chemical  science  in  the  industries,  and  particularly  in 
medicine. 

The  offices  of  the  Foundation  are  in  the  Market  and  Fulton  Bank 
Building,  8i  Fulton  Street,  New  York  City. 


[703 


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